The number of Hedge Funds entering the Crypto Space is exploding
According to a report out the other day, over 70 new hedge funds are in the process of being created.
Not just any hedge funds, but crypto specific hedge funds.
According to Corey McLaughlin (manager at Arthur Bell), he's never seen anything like it:
"I've been in the hedge fund space since 1998, and I've never seen anything like it in volume of launches in a particular area. It's just crazy."
So, he was around during the tail end of the Dot.com bubble as well as the 2008 Financial Meltdown yet he has never seen anything like this in the hedge fund space?
Interesting...
Hedge Funds in general often follow the herd mentality, especially in regards to their focus.
They routinely are looking for the next "hot" thing.
They are often cited as being some of the brightest and the best investors out there, which is true to some degree, but it also should be noted that they rarely beat the S&P market index.
Especially lately.
In fact, this is probably one of the main reasons they are chasing cryptocurrencies to begin with. They look at their returns over the past couple years and they see that they can't beat the S&P index funds, so they need to find new investment vehicles to spice up their gains.
Enter crypto.
Since most funds have a specific investment thesis stated with the creation of their fund, they can't just deviate within that fund to new investment products.
Well technically they can do whatever they want, but they risk losing investor support, so it's kinda the same thing...
What do they do?
They create entirely new funds dedicated to these new products!
More tools at their disposal.
The good news for hedge funds is that they will have a wealth of hedging vehicles that most funds before them didn't really have access to, especially those located in the United States.
Specifically, I am referring to futures products and options, you know, derivatives.
More about those can be read here:
https://steemit.com/cryptocurrency/@jrcornel/bitcoin-options-are-on-the-way
In fact one could probably make the argument that some of these funds are only able to enter the market NOW that these new tools are becoming available.
A sign of demand.
Either way, all these new funds signify the kind of demand there is out there for cryptocurrencies. If investor money wasn't pouring into the space we wouldn't be seeing all these new funds being created.
We are riding a pretty strong wave ladies and gentleman, we need to make sure we enjoy it while it is here! :)
Sources:
https://cointelegraph.com/news/hedge-funds-tied-to-cryptocurrencies-exploding-over-70-in-pipeline
Image Sources:
http://www.capital-moments.com/introduction-alternatives-and-hedge-funds/
http://crooksandliars.com/2015/05/hedge-funds-arent-casino-capitalists
https://www.hedgethink.com/top-50-hedge-funds-world-part-6-10-1/
Follow me: @jrcornel
Thanks for sharing
hopefully this is the start of institutional money flooding into this space. It will serve to lift prices but also put pressure on developers to deliver and actually design crypto with real life use cases. Too many coins are purely designed for speculation and have no real purpose! This may help to clean things up a bit!
I totally agree with you. Though I am quite idealistic about cryptos and what they should be used for, I think there needs to be a real-life application for them as well. I really like Ripple (XRP) because it has a clearly defined vision. It wants to replace the SWIFT system used by banks with a cheaper and faster alternative. They also want to add alternative I think this is a product with a great future because it is actually supported by government institutions and large banks such as Rabobank, Santandar Bank and even the Federal Reserve stated it may be a useful tool for the banking industry.
However, I also want to see government power diminished and therefore also support and buy EOS which wants to decentralize everything. More power to the people. However, I do not see banks going away in the future, however, I hope that will adopt more market friendly alternatives once cryptos gain a foothold. If centralized governments lose the ability to interfere with banking then banks do not need to follow their rules and regulation and are free to design user-friendly products. However, I can also see that there is more centralization in XRP than in Bitcoin at the moment. It will be interesting to see how things pan out, however, I believe that XRP will become more decentralized in the future. Nevertheless, I can see some limitations on their wallets (requiring a tax ID etc.). Really not a big fan of that.
So true. So many crap coins do nothing. We need an altcoin that works with a video sharing platform. Whoever does that will be rich and destory youtube.
Hi @jcornel, I've seen earlier as a quarter report that arkinvest's crypto investment funds were outperforming everything out there, but I can't see anything named here.. what's the news? which one of the hedge fundge have started joining the trend ?
or is it just something about the ethereum alliance growing bigger with some more hedge funds ?
anybody know of any hedge funds dedicated to crypto? i'd love to email them looking for a job, i spend all my free time studying crypto anyways!
You mean like https://satoshi.fund or?
This seems like good news for those of us already in the space. But I don't fully understand the negative implications.
Thanks for the quality content as usual!
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Really interesting article. Cryptocurrencies are finally becoming mainstream.
Finally ..
people know that this market will boom, thats why they are creating hedgefunds while the market is a baby
This baby is gonna have some crazy growth spurts in the near future
It's going to be interesting to see if they are any better at picking cryptos than your average cryptocurrency user. The later is used to all the scams, but the hedge funds come from a world where that stuff is almost cleansed away.
The crypto market would soar if the hedge funds started to pour money in the market! The entire crypto market cap is relatively tiny compared to other financial markets. Buy and hold!