Dive in cryptocurrency hedge fund returns reflective of volatility

June 18, 2018
Chris Wheal

A sign of the times, cryptocurrency hedge funds’ returns shrink in first half of 2018 Source: Shutterstock.com

Returns of cryptocurrency hedge funds shrunk by 35% in the first half of 2018, the Financial Times reported reflecting the overall volatility of digital currencies and underscoring negative sentiment.

Figures from HFR, US analytics firm, reveals the cryptocurrency hedge funds investing in the digital coins and the blockchain tech supporting them dived in the first half of 2018 with four out five months showing negative performance.

Cryptocurrency markets have been roiled by recent events including the US Commodity Futures Trading Commission launching a probe into the four major crypto exchanges earlier in June. Cryptocurrencies dropped sharply upon the announcement.

A rebound was seen on 14 June after the Securities and Exchange Commission announced that Ethereum “in its present state” was not regarded as a security.

Not a security

The SEC Corporation Finance Director, William Hinman was quoted as saying: “Based on my understanding of the present state of ether, the Ethereum network and its decentralised structure, current offers and sales of ether are not securities transactions.” The argument that it was not a security lifted some concerns around heavy regulation.

However, sentiment remains dulled caught in the crosshairs of price volatility and continuing concerns over regulatory oversight. In 2017, crypto hedge funds rose 2,700%. Bitcoin hit a peak of $19,137 in December 2017.

The price began to descend from highs in January this year and at the time of publication Bitcoin had fallen to a low of $6,466.60 and its market cap sits at $110bn.

Despite the drop in performance for the funds, interest continues to grow even as investors settle in for a bumpy ride in the future because, as Henri Arslanian, fintech and cryptocurrency lead for Asia at PwC, states in the FT: “Whilst retail investors may see volatility in the crypto markets as a downside, many crypto funds see it as an opportunity.”

 

Post written by Chris Wheal
Chris Wheal is editor of OpenLedger's news and features service. An award-wining business journalists himself, he runs a team of freelance journalists from across the UK and north America.

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