The rise in popularity of the digital assets market has attracted many an investor to the, often choppy, waters of cryptocurrency trading. While the growth of bitcoin and various other digital assets has garnered the attention of various players directly buying, selling and holding crypto assets on several different exchanges and virtual wallets as well as the more risk-averse type of investor, preferring to interact with the market through a third party.
While many investors derive a thrill from making split second decisions based on the volatile ebb and flow of cryptocurrency prices, some investors prefer to entrust their funds to a representative who executes trades on their behalf. Digital currency funds have entered the crypto market, delivering investment services designed to insulate their clients from the risks that accompany exposure to an emerging market.
Cryptocurrency funds made up 20% of the hedge funds launched in 2018. 90 new funds had been launched by the third quarter of this year, with 600 expected to become active by year end. Indicating increasing institutional interest in the digital currency market.
What Is A Cryptocurrency Fund?
Digital asset funds are investment vehicles that offer clients exposure to the cryptocurrency market while insulating them from direct risk. Crypto funds pool client’s capital and invest in digital currencies, with fund managers making strategic decisions on behalf of clients.
Cryptocurrency funds come in varying forms, from publicly traded funds to hedge funds. Each individual fund employing a varied approach to their investment decisions.
For a share of the profits, crypto funds either invest in a single digital currency, or spread their capital across an array of promising projects. Some buy and hold assets while others capitalize on short term market action by getting involved in active trading.
There are different types of crytpcurrency funds offering thier clients expert management of their cryptocurrency investments.
Publicly Traded Funds often employ a long-term approach, buying and holding digital assets for an extended period. These funds list on public exchanges and invest in either one major cryptocurrency or a mix of the top 10-20 digital currencies according to marketcap and Initial Coin Offerings.
Private Funds unlike Publicly Traded Funds, arent listed on any exchanges and usually require a minimum investment from clients. Private funds tend to use a buy-and-hold strategy, charging clients an annual management fee.
Hedge Funds often take a more aggressive investment stance and seek to outperfom a certain market benchmark by actively trading in bull and bear markets in an effort to maximise short term
Cryptocurrency funds offer access to the cryptocurrency market while also offering shielding from risk through skilled management, a large pool of capital spread across various digital assets and the benefit of not having to make investment decisions personally. Though digital asset funds are a relatively recent occurrence in the cryptocurrency market, there are already there are over 400 in existence.
Incriminatory oversight and media coverage of cryptocurrencies has likely caused many investors to regard the digital assets market eagerly, cryptocurrency funds are usually the most viable option for investors with a low risk appetite. These are the top performing cryptocurrency funds in 2018.
The 5 top performing cryptocurrency funds of 2018
Even as the market went from late 2017’s historic bull run that saw Bitcoin valued at $20,000 USD, to 2018’s bear dominated market, these cryprtocurrency funds have seen growth. Crypto Fund Research data suggests an eagerness to invest in this new space, with estimates pointing towards a total of 120 new crypto funds by the end of 2018.
That said, here is a list profiling in brief 5 of this year’s leading cryptocurrency funds based on the asset under their management.
#1 Polychain Capital: Founded in 2016 by Coinbase’s first employee, Olaf Carlson-Wee, and as of February this year has become renowned as being the first in its class to have $ 1billion USD of crypto assets under management. This fund strictly invests in cryptocurrencies themselves and not any associated companies.
#2 Pantera Capital’s Bitcoin Fund: This fund- which opened in 2013 – forms part of Dan Morehead’s Pantera Capital empire. With approximately $ 810million USD of in managed assets, this company also gives investors the option of investing in blockchain as opposed to a cryptocurrencies only approach. It is also said that the company’s lifetime returns had gone beyond 25 000 % by December of 2017.
#3 Accelerated Digital Ventures: With $ 180 million USD under management, the 2016 born fund approaches the arena of crypto funds by uniting fledgeling blockchain based startups with institutional investors. The aim is that institutional capital is put use in such a manner that it allows startups enough room for innovation in the highly competitive blockchain and crytocurrency market.
#4 Galaxy Digital Assets: The New York City-headquartered company was founded in 2017 by Micheal Novogratz, who -until recently- had been employed by Fortress Investment Group. The model used here is a mixture of venture capital and hedge fund (more hands-on approach to investing than a buy hold strategy). The firm manages around $500 million USD in assets.
# 500 Startups: This early-stage venture capital fund was launched in 2014. With about $55 million USD in managed assets, the Silicon Valley-based fund noted as being the most active in the world. The fund has invested in cryptocurrency and blockchain projects like Hijro and BlockCypher, to name but two.
What makes crypto funds an attractive option to investors?
There are a multitude of reasons that the growth of cryptocurrency fund can be attributed to, examples of these include:
Expertise: Allowing an experienced fund manager to make the tricky decisions can offer an investor the peace of mind of knowing that his/her funds are in the hands of a professional.
Diversifying your portfolio: Handling a well-spread portfolio can be very tricky for somebody new to cryptocurrency, or an individual who might not have the time to do so. Once again, a professional offers peace of mind.
Benefits of buying power: Due to the vast capital available to them, crypto funds are also able to offer investors a slice of crypto projects that otherwise would not be within the financial grasp of an individual investor.
The growth of crypto-related funds may go a long way in legitimizing the sector for mainstream adoption. However, for those who might be interested in crypto funds, doing your own research is key. This sector is still young, and anything could happen.