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A cryptocurrency hedge fund refers to a proactively supervised fund that pools capital for investment in cryptocurrencies. Complex portfolio-building strategies and composite risk management methods allow investors to invest without needing proficiency in finance and cryptocurrencies. Experienced managers run the crypto hedge funds, re-adjusting investments contingent on prevailing market conditions. These hedge funds employ complex investment strategies to yield financial returns that surpass the general market. Investor excitement and media attention cause the value of crypto to rise and fall. However, some funds have withstood the test of time and are worth exploring. Here are 7 most popular cryptocurrency hedge funds that you might consider investing in.
Pantera Capital
Pantera, founded in 2003 by Dan Morehead, a well-known Bitcoin bull, is one of the oldest digital asset investment firms, initially focused on traditional investments geared toward investing in macro trends before switching in 2013. Pantera has several high-profile institutional backers in the conventional space, including Benchmark, Fortress Investment Group, and Ribbit Capital. With the growth and potential of digital assets, Pantera switched focus towards blockchain and cryptocurrency. Pantera requires a minimum investment of $100,000 to be eligible. It is, therefore, best suited for high net worth individuals or institutional investors. As of November 2021, Pantera Capital managed $6.4 billion in blockchain assets. The concept of crypto hedge funds is relatively new, with four out of five established between 2017 and 2020. Pantera Capital has been around since 2013, so it's pretty old for a cryptocurrency hedge fund.
Coin Capital
Coin Capital is an Arizona-based hedge fund manager focussing on digital assets and cryptocurrencies such as bitcoin. It was founded in 2013 by Samuel Cahn and brothers Sigmund and Drew Sommer, having received seed capital from a family office. Coin Capital befits people with smaller wallets compared to Pantera Capital. This hedge fund invests in various crypto, blockchain startups, and single coin offerings, managing over 40 cryptos: Ethereum, Litecoin, Bitcoin, Ripple, and Dash. Coin Capital woos accredited investors under the scrutiny of the SEC and employs a straightforward buy-and hold-model for investors with a "long-term bullish stance" on the bitcoin price.
Bitcoin Reserve
Bitcoin Reserve operates a crypto hedge fund known as an arbitrage fund which trades across various crypto exchanges simultaneously, thus correcting market inefficiencies. Cryptocurrencies follow different prices across different crypto exchanges. An arbitrage fund aims to yield profits while minimizing risk by taking advantage of these price differentials by buying low on one exchange and selling high on another, using automated trading. The fund, a subsidiary of a British Virgin Island-incorporated firm called Chesham Group Ltd, claims to have returned 765% in the 12 months ending April 2014, beating bitcoin's price movement. Bitcoin Reserve is not an ideal fund for average investors. An investor requires more than $59,000 to gain entry making it better for institutional investors and high-net-worth individuals.
Polychain Capital
Polychain capital was Founded in 2016 by Olaf Carlson-Wee. It is probably the most significant digital asset fund globally, managing over $1 billion in assets. Polychain invests in digital currencies, and early-stage start-ups focused on blockchain technology and cryptocurrencies. With the ability to pull funds from respected venture capitalists in traditional finance, such as Sequoia Capital, Polychain has established itself as a prominent cryptocurrency fund. Polychain centers on troubled projects with solid fundamentals to get ahead of the market.
Digital Currency Group (DGC)
DGC is one of the most popular cryptocurrency hedge funds with over 130 investments in various projects. Barry Silbert founded it in 2015. The reach of DCG is massive, fronted by its subsidiary, Grayscale, which has an absolute duty to invest in digital currencies. As of 2019, Greyscale announced that it had accumulated an AUM of over $2.7 billion, surpassing its nearest rivals. The majority of its client base are institutional investors, a positive indication of the increasing interest of institutional players in the cryptocurrency industry. Grayscale is the first-ever publicly traded bitcoin investment vehicle called the Bitcoin Investment Trust. DGC became famous after it acquired CoinDesk, one of the most significant global cryptocurrency, and blockchain-related media publications companies.
Blockchain Capital
Blockchain Capital seeks to help entrepreneurs build world-class companies and projects based on blockchain technology. The firm enables crypto-interested firms with funding, forming strategic partnerships, recruitment, and business strategies. Blockchain Capital is a venture capitalist that has financed 75+companies and projects since its conception. Conceived in 2013 by Bart Stephens, Bradford Stephens, and Brock Pierce, Blockchain Capital represents one of the oldest investment funds in cryptocurrency. Blockchain Capital is a multi-stage investor investing in publicly traded cryptocurrencies and has equity in early crypto and blockchain projects, financing over 80 companies since its inception.
Andreesen Horowitz (a16z)
Andreessen Horowitz is a Silicon Valley-based venture capital firm with over $10 billion in management across multiple funds that invest in various asset classes from seed to growth stages. A16z’s arrival into the cryptocurrency space was a massive deal in the industry. It is the first time an established investment institution has explicitly advanced into investing specifically in digital assets. Alternate to utilizing active trading methods, a16z employs a more fundamental long-term approach to its investments.
Author's Thoughts
There are many popular cryptocurrency hedge funds to invest in, but it pays to keep in mind that hedge funds are high-risk as they seek fast short-term gains instead of long-term, slower growth. Although crypto hedge funds are expanding, developments are still in an early stage. A hedge fund is the best option for investors who are looking to invest in cryptocurrencies but have limited knowledge of the landscape. There are imminent risks, but should success strike, it will be well worth your investment.