Over the past two weeks, the crypto market has declined over 30% from about $ 2.5 trillion to about $ 1.73 trillion. But that decline has put off hedge funds’ interest in digital currencies.
Users often use hedge fund platforms to invest funds in a select combination of cryptocurrencies, such as the Crypto Copyfund. Venture capitalists use these funds to track and compare the price and market trends of Bitcoin against the popular cryptocurrencies like Internet computers, USD coin, Binance coin, DASH, Aave, XRP, Dogecoin, Ethereum and Cardano.
A cap on the number of hedge funds that invest in cryptocurrency?
As of this writing, there are over 200 active cryptocurrency hedge funds (CHF). Interestingly, 80% of them have been released within the last four years. In addition, 54% of the venture capitalists in virtual currency hedge funds are high net worth individuals, while 30% of them are family offices.
A recent PWC crypto hedge fund survey suggests that just over $ 1 million is the average investment ticket size, while about $ 400,000 is the average ITS. The interest rate level of institutional venture capitalists has led to changes in the composition of the investor base. Currently, the average number of venture capitalists in most hedge funds is around 24.
Growing interest in investments
Nearly 200 crypto funds were launched in 2017 as the year saw heightened awareness of cryptocurrency and an increase in the price of most coins. In addition, nearly 700 hedge funds had been launched by the end of the year. Last year, total assets under management by hedge funds worldwide peaked at around $ 3.9 billion, an increase of $ 1.9 billion, or 90%, year over year.
The most popular tokens for investment
Most exchanges trade Bitcoin, Ethereum, Litecoin, Chainlink, and Polkadot in that order. They use the services of decentralized crypto exchanges (DEX) to achieve secure and direct P2P trading in digital assets without involving third parties in the transaction. Popular DEXs are Coinmama, Linch, eToro, Uniswap, Coinbase, Kraken, Binance and Sushiswap. However, 16% of those CHFs use Uniswap, making the DEX the preferred option. Linch and Sushiswap round off the three most-used DEX by CHF.
People are often affected by the herd mentality; what the majority use is considered the best. Therefore, most investors invest in the coins that hedge funds have invested in. As a result, the price of these coins is exploding, causing a boom in the entire crypto market. Hence, Bitcoin could top, hit, and even surpass the price of $ 40,000. It is a proven fact that the price and value of Bitcoin will skyrocket as its popularity as a medium of exchange or investment increases with investors, institutions, and the general population.
This happens because Bitcoin obeys the law of supply and demand, which states that the higher the demand (for Bitcoin), the lower the supply and, consequently, the price increase. As a result, no matter what happens in the crypto assets space, new CHFs will continue to emerge and they will continue to generate excellent returns.