The rise of crypto investment funds


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In line with the continual growth of the cryptocurrency industry, crypto hedge funds and other investment firms become more commonplace. This growth can be attributed to several things: rising crypto prices, public awareness, continued adoption,, and so forth. Publicly and behind the scenes this growth appears to be accelerating.

A Historic Overview of Crypto Investment Funds

In 2017, about 700 hedge funds existed, with crypto-focused funds accounting for less than 1 percent of the total. Today, there are 357 cryptocurrency-oriented hedge funds, making it one of the fastest growing segments in the hedge fund industry.

Similarly, VC funds between 2017 and now has seen a sharp uprising. Moreso than cryptocurrency hedge funds allocations. Of the more than 800 blockchain investment funds, over 400 are set up as venture capital funds. It is easy to see why: existing technology/fintech VC firms have begun investing in blockchain. These tech firms expand their investments into blockchain startups and may eventually end up launching their own blockchain funds.

Crypto investment funds
Source: Crypto Fund Research

In 2017, over 290 new funds – including hedge funds and venture capital offerings – launched their cryptocurrency fund. Around the same number of crypto investment fund surfaced in 2018, resulting in an increase by 230 ventures. .

Alongside the launch of several new VC and crypto hedge funds, existing hedge funds cannot avoid dealing with cryptocurrencies soon. Similarly, existing VC firms are likely to continue adding blockchain investments. Furthermore, an increase in separate blockchain funds may occur as well.

Starting out Small is Crucial

It is worth noting round half of these crypto investment funds are small firms. They own less than $10 million in assets under management (AUM) and make up less than 1 percent of total hedge fund assets. However, a number of crypto funds exist with well over $100 million in asset capital. Noteworthy names include Pantera Capital, Galaxy Digital Assets, Alhpabit Fund, and Polychain Capital, among others.

Additionally, many of these firms are run by their founders alongside one or two professional employees. Usually, they have lesser around 5 or fewer employees. Around 5 percent of crypto investment firms have more than 25 employees. Many of them are VC funds that do not invest in digital assets/blockchain firms at this time. Hopefully, this situation will improve in the near future.

Similarly, most US-based crypto funds do not appear to be registered with the SEC. Since many of them are small firms, they qualify as an exempt advisor and are not required to register at this time. Once their business grows and expands, more strict requirements will be enforced.

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