Bitcoin’s meteoric rise has boosted crypto hedge funds
Given Ruvic / Reuters
Cryptocurrency hedge funds rose 35% in February, new data showed. The relatively new institutes far outperformed the broader market as the price of Bitcoin rose to record highs.
An index tracking hedge fund focused on cryptocurrencies from data provider Eurekahedge gained 35% in February and benefited from Bitcoin’s gain of around 36.5%. This was the best performance since May 2019, with the subsector rising to 74.9% year-to-date.
Funds continued to rise after a notable rally in 2020 when the Eurekahedge Cryptocurrency Hedge Fund Index rose 198%.
The industry is new and relatively small, Eurekahedge chief analyst Mohammad Hassan told Insider, and it only accounts for 0.2% of global hedge fund business with around $ 3.4 billion in assets under management.
But Hassan said it was a growing area. “The strong performance in the underlying crypto asset markets as well as the institutes’ bubbling curiosity supported the room,” he said.
Overall, hedge fund managers rose 3% in February. This outperformed the MSCI All-World stock index, which rose 2.7% for the third straight month.
Hedge funds are investment firms that have more leeway than traditional institutions to invest in a range of asset classes at their own discretion.
Bitcoin’s meteoric rise has naturally drawn many hedge fund managers in, with Mike Novogratz’s Galaxy Digital being a prime example. Crypto hedge funds can pursue a number of strategies, including betting against the price of Bitcoin, and investing in a range of currencies.
Funds are rising thanks to the Bitcoin rally, which rose more than 740% over the past year. The price rose 36.5% in February and around 25% in March to $ 56,600 on Wednesday, according to data from Coinbase and TradingView.
However, it remains to be seen how well the industry would handle a price drop that some key players have warned it could come after the recent rally.