Crypto Hedge Funds Are Performing Far Better Than Traditional Hedge Funds
Summary
- Crypto hedge funds are up 13.4% year-to-date (YTD) while the overall hedge fund industry is down 6.7%.
- The crypto market experienced high volatility in 2020.
According to Hedge Fund Research’s HFR Cryptocurrency Index, crypto hedge funds on average printed a 26.2% loss in March with a 19.5 percent gain in April, bringing the year-to-date returns to 13.4%. On the other hand, the overall hedge fund industry printed a loss of 6.7%, according to the HFRI Weighted Composite Index.
However, crypto funds are not risk-free. Following the 2017 crypto bull-run, the Cryptocurrency Index printed a yearly loss of 69.8% in 2018. Following the bloodbath, crypto hedge funds recovered in 2019 printing a 24% gain.
As crypto hedge fund popularity continues to grow, institutional money has begun to flow into the crypto space with funds hitting new highs.
High Volatility
The cryptospace has seen high volatility this year. On March 11th and 12th Bitcoin fell over 50% from $8,000 to under $4,000, also known as Black Thursday. The HFR Cryptocurrency Index printed a 26.22% loss in March, like due to Black Thursday’s marketwide events. Furthermore, with Bitcoin largely controlling and dominating crypto markets, Bitcoin price volatility affects other digital assets (eg. ETH, XRP) as well.
Traditional stock markets also witnessed unusually high volatility due to coronavirus. The Dow Jones Industrial Average (Dow) serves as a general market indicator. The Dow opened the year at over 28,000 points, sliding to 18,600 by late March. The Dow has since recovered significantly but now without high volatility.
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