- Bitcoin has outperformed crypto hedge funds in 2023, showcasing a 77% gain in contrast to an average of 15% returns generated by the funds.
- About 13% of crypto hedge funds have closed due to underperformance and problems accessing banking services.
Unraveling Bitcoin’s Winning Streak Against Crypto Hedge Funds
Amid a testing year for crypto hedge funds, Bitcoin emerges as the champion, reaping a whopping 77% gain, significantly outpacing the mere 15% average returns generated by the hedge funds in the first half of 2023.
21e6 Capital AG, a Switzerland-based investment advisor, has revealed alarming statistics. Around 13% of crypto hedge funds have shuttered due to sub-par performance and banking accessibility issues, highlighting the unsettling reality confronting these entities.
Crypto hedge funds suffer from lagging performance to Bitcoin and a set of operational difficulties, such as accessing banking services.
— Yueqi Yang (@Yueqi_Yang) August 4, 2023
The Trials of Crypto Hedge Funds
Contrary to reports proclaiming the warm embrace of cryptocurrencies by banks, crypto hedge funds tell a different story. Post-2022’s industry turmoil, many funds chose to maintain larger cash positions, consequently missing out on Bitcoin’s remarkable rally.
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Maximilian Bruckner, head of marketing and sales at 21e6, pointed out the ongoing struggle of many funds in securing new banking partners. The situation has been exacerbated by the downfall of crypto-friendly banks such as Silvergate Capital and Signature Bank, and the increasing regulatory pressures led by the U.S. Securities and Exchange Commission (SEC).
Out of the 700 crypto hedge funds tracked by 21e6, 97 have ceased operations in 2023. The FTX collapse, where many funds parked their assets, triggered the closure of several funds.
Funds employing “market-neutral strategies” found themselves at the bottom of the performance ladder, yielding only a 6.8% return for the first half of the year. The report indicated that although all crypto fund strategies saw positive results this year, they substantially underperformed compared to Bitcoin. This was especially pronounced for those with significant altcoin exposure, futures, or those heavily reliant on momentum signals.
While investor confidence showed signs of modest improvement, fund inflows and new fund launches are still lagging, failing to indicate a complete recovery in sentiment.
As for the general crypto market outlook, digital assets are currently treading water with little fluctuation in total capitalization, which sits at $1.2 trillion. Despite a slight pullback for BTC and ETH this week, they remain within their respective range-bound channels, marking an era of historically low trading volumes and volatility in what’s turning out to be the lengthiest crypto winter to date.
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