Why the Number of Hedge Funds Active on the Crypto Market is Increasing
According to Francesco Filia, CEO of Fasanara Capital, cryptocurrencies often boost the performance potential of traditional hedge funds due to their volatility and inefficiency. The combination of these two characteristics allows traditional asset classes to outperform each other, she said. Fasanara Capital has more than $1 trillion worth of hedge fund assets, most of which invested in cryptocurrencies.
Strong price fluctuations in digital assets in August catapulted traditional hedge funds to new heights. Not only did they achieve a 24% increase in turnover, but they also outperformed crypto investors.
If you want to find why more and more hedge funds are active on the crypto market and to be the first to find the most important business headlines in the world, download for free our companion app Born2Invest.
What was the trigger for the gains?
According to the data, the focus on bitcoin and other digital assets alone boosted hedge fund turnover by nearly 145% in 2021.
Crypto is only a small part of the equation. Some hedge funds also focused on commodities, bonds, and other digital assets to boost their revenues.
However, the high returns of cryptocurrency have caught the attention of many traditional hedge funds, which are now taking timid steps to become active in crypto.
Crypto’s volatility has wide appeal
According to Francesco Filia, CEO of Fasanara Capital, cryptocurrencies often boost the performance potential of traditional hedge funds due to their volatility and inefficiency.
The combination of these two characteristics allows traditional asset classes to outperform each other, she said. Fasanara Capital has more than $1 trillion worth of hedge fund assets, most of which are invested in cryptocurrencies.
The bitcoin price drops in June took a toll on crypto funds. Nevertheless, they gained over 200% in 2020, which was a record year for bitcoin enthusiasts.
According to recent data, hedge funds that focus on currency trading posted gains of up to 0.59% in August. Those that trade stocks made 0.8%.
So far, Bitcoin – the digital currency most commonly used by crypto funds – has experienced sharp price fluctuations. At the beginning of the year, Bitcoin was trading at $29,000. In May, it rose to $63,000 before recently falling below $30,000.
Currency and stock markets remain quiet
However, the recent Bitcoin price drops are a blessing in disguise. Most traders are now betting more heavily on digital currency. On the other hand, the currency and stock markets are quiet – even as low-interest rates on major currencies stifle big price moves in other parts of the world.
Surprisingly, big price swings in digital currencies have prompted hedge funds to jump on the crypto bandwagon. And most of them are looking to become even more active as investors.
One example is Brevan Howard – one of the largest macro hedge funds in the world. In a statement, plans were announced to create a digital company to explore more crypto opportunities in the future.
It’s funny how two years ago hedge funds wanted nothing to do with cryptocurrencies. Now the fear of missing out is real. They are even more afraid of criticism from existing investors.
(Featured image by sergeitokmakov via Pixabay)
DISCLAIMER: This article was written by a third party contributor and does not reflect the opinion of Born2Invest, its management, staff or its associates. Please review our disclaimer for more information.
This article may include forward-looking statements. These forward-looking statements generally are identified by the words “believe,” “project,” “estimate,” “become,” “plan,” “will,” and similar expressions. These forward-looking statements involve known and unknown risks as well as uncertainties, including those discussed in the following cautionary statements and elsewhere in this article and on this site. Although the Company may believe that its expectations are based on reasonable assumptions, the actual results that the Company may achieve may differ materially from any forward-looking statements, which reflect the opinions of the management of the Company only as of the date hereof. Additionally, please make sure to read these important disclosures.
First published in CRYPTO MONDAY, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.
Although we made reasonable efforts to provide accurate translations, some parts may be incorrect. Born2Invest assumes no responsibility for errors, omissions or ambiguities in the translations provided on this website. Any person or entity relying on translated content does so at their own risk. Born2Invest is not responsible for losses caused by such reliance on the accuracy or reliability of translated information. If you wish to report an error or inaccuracy in the translation, we encourage you to contact us.
Adult-Use Cannabis Could Soon Be Legalized in Colombia
Colombia is one step closer to the legalization of adult-use cannabis. Many parliamentarians who were previously fervently opposed to the...
Why Ripple Registered a 29% Weekly Increase
The number of daily transactions on Ripple recently reached 2.3 million, the highest in 16 months. At the same time,...
Moderna Will Pay $70 Million to Generation Bio for Genetic Medicines
Moderna closed 2022 with a profit of $8.36 billion, which represents a decrease of 31% compared to the previous year....
Cotton Demand Has Been Ramping Up for the Last Couple of Months but Fell Off
Cotton was lower and closed at new lows for the move. Chart trends turned down again with the price action...
The US Equity Crowdfunding Platform WeFunder Launches in Europe
Unlike the other platforms, WeFunder has taken a "soft" approach compared to, for example, Republic's $100 million acquisition of Seedrs,...
Featured1 week ago
Volatility in the Stock Markets Is Never a Good Sign
Biotech7 days ago
AstraZeneca Increases Its Commitment to Spain with More Investments
Biotech2 weeks ago
The Future of Healthcare: How Technology Is Changing the Industry
Africa2 days ago
Nigeria CBDC Adoption Rises as Fiat Currency Shortage Grips Country