Report: Crypto Hedge Funds Are Down 50% This Year
A new report has found that most crypto hedge funds are down by as much as 50% in 2018, following last year’s market bull run.
Autonomous Next: Crypto Hedge Funds Are “Underwater”
The report, released by crypto research and fintech analysis firm Autonomous Research LLP, delves into the tumbling cryptocurrency market and how crypto hedge funds have taken a significant hit since the start of the year.
The report states that “most crypto funds” are down at least 50% since the start of the year, and many are “rushing” to hedge their investments through shorting the market.
“Looking at the self-reported performance of some funds in our database shows the extent of the damage. We have two samples: July 31st and April 30th. In each case, we compare them to the BITA 50 index, which tracks the top 50 liquid coins. The first chart shows both the returns and the index, the second chart just shows the difference. The reported outperformance averages around 20%. Given the BITA 50 index is now down about 70%, we expect that most crypto funds are at least 50% underwater for this year.”
Autonomous believes the negative sentiment around crypto hedge funds is in part due to the timing at which they were created.
Many of the “370+” hedge funds analyzed formed in mid-2017, missing out on early gains before the market went parabolic –– a parabolic advance that has had almost all of its gains wiped out in the current downtrend.
Could Ethereum Be to Blame for Negative Market Sentiment?
Autonomous points to Ether as a potential cause for negative market sentiment and uncertainty fueling the losses crypto hedge funds are experiencing.
The firm suggests that although the number of developers building on the platform has only increased, it has first-mover advantage. Notably, the number of ICOs launching on the platform hasn’t decreased, but the crypto community itself is causing the negative sentiment.
Specifically, Autonomous points to recent comments made by outspoken BitMex CEO Arthur Hayes and New York-based digital asset hedge fund Tetras Capital.
Tetras Capital released a scathing report in July saying that irrational speculation drove the price of Ether far beyond its real value and that it “will inevitably suffer further as the market sobers up.”
Tetras also sees Ethereum “struggling” at both becoming a decentralized application platform and a capital raising platform. Tetras suggested shorting Ether was “an ideal strategy for hedging out overall crypto market risk.”
Hayes shared similar sentiment around Ether, calling it a “double digit shitcoin” in a recent BitMex newsletter distributed to investors. However, Hayes comments could be to encourage the shorting of Ether — something his exchange can profit from.
BitMex recently added ETHUSD perpetual swaps to its product offering, and within days became the most liquid Ether-based trading pair globally.
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