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Fund managers specializing in cryptocurrencies are tempting for investor's patience after a year in which the huge price drop has severely affected their performance.
Investors have poured money into funds that sell bitcoins and other cryptocurrencies in 2017, seeking to benefit from an industry-wide boom. But with the price of bitcoin declining by nearly three quarters last year, reflecting large drops in other digital assets, many investors tried to head out, pushing the funds to push them to continue the course.
In a letter to investors in December, Pantera Capital, based in San Francisco, admitted that 2018 was "a difficult year for all cryptocurrencies and pawns".
The company, created by the former head of Tiger Management's macro trading Dan Morehead and which manages over $ 500 million in assets, has urged clients to look to the long-term case of encryption. A year ago, the company predicted that the price of the bitcoin could have reached $ 50,000 by 2019 – far from its current level of around $ 3,800.
"After such a prolonged decline in the market, it is important to reflect and reevaluate the thesis behind utility tokens", wrote in the letter More Mr and Joey Krug, co-chief investment officer.
The Pantera Digital Asset Fund is one of the largest in the industry, with an increase of almost 150% between the launch in November 2017 and the end of that year. But during the first 10 months of 2018 it fell by 77%, according to the numbers seen by the Financial Times. A separate fund dedicated to the so-called initial coin offerings, a popular method of collecting money for crypto start-ups, fell 75 percent in October last year, after gaining almost 350 percent in 2017.
"We firmly believe that tokens will make use of the real world, and it is already beginning to happen in the depths of this bear market," wrote Mr Morehead and Mr. Krug. But they added that it could take two to three years for the blockchain networks to reach the scale, which would allow digital tokens to be more widely used. Blockchains are electronic registers stored on thousands of computers, protected by cryptography, making them more difficult to tamper with than traditional information stores.
Pantera has not replied to a request for comment.
While funds focused on cryptography may in theory bet on both the rise and fall in prices, most have been reluctant to sell short-term assets due to strong price increases in 2017 or because many managers believe fundamentally in long-term success. term of the cryptocurrencies. This means that many have been severely hit by the market crash. Crypto hedge funds are on average down by 70% in 2018 until the end of November, according to the HFR data group.
Galaxy Digital, a merchant bank focused on crypto and blockchain created by Mike Novogratz, a former speculative fund trader and Goldman Sachs partner, has also found it difficult.
The passively managed Galaxy Benchmark Crypto Index, which implements an annual management fee of 2.5% and holds a basket of cryptocurrencies including bitcoin, XRP, ethereum and litecoin, decreased by 50.6% since its launch in May 2018 at the end of October.
"The asset class continues to show signs of maturity, as stocks that would have led to frantic trading sessions have given way to patients in the market who want to see and react to results, not titles," he wrote in a November letter to investors.
Galaxy did not respond to a request for comment.
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In November, Mr. Novogratz told the FT that 2018 had been "challenging", but he predicted that financial institutions will move from cryptocurrency investments to cryptocurrency investments at the start of this year. "That's when prices start to move," he said.
Not all hedge funds suffered heavy losses. For example, the Cryptocurrency Systematic Alpha Management fund in New York earned 4.3% in the first 11 months of last year.
The computerized fund trades bitcoin futures and seeks to profit from upward or downward price trends, which means it has been able to profit during the November bitcoin crash of 38 percent against the US dollar.
But the losses in December mean that the fund should have finished slightly red in the year, according to Peter Kambolin, CEO.
