
Despite Bitcoin’s notable advance in 2023, the crypto hedge fund scene is experiencing a mixed reality. According to a study conducted by 21e6 Capital AG, almost a hundred funds dedicated to crypto had to cease their activities during this period.
Nearly 100 crypto funds have closed this year
While the value of Bitcoin (BTC) has risen 83% since the start of the year, hedge funds have failed to match this meteoric rise. Unlike previous periods when cryptocurrency-related hedge funds thrived alongside the rise of digital assets, 2023 saw an increase in shutdowns.
According to information reported by Bloomberg News, the year 2023 saw 97 cryptocurrency funds shut down, out of approximately 700 in existence globally.
The challenges facing these funds appear to be varied. The report suggests that industry instability over the past year has caused many funds to hold on to more cash than usual, potentially hurting their performance.
The report points to several factors:
- The funds continue to suffer the repercussions of the bankruptcy of FTX.
- Banking institutions are less inclined to support cryptos.
- The investment strategies of hedge funds have shown their limits.
In addition, finding new banking partners proved difficult for some funds, jeopardizing their long-term viability.
” Some funds are having difficulty finding new partners for banking services“, Maximilian Bruckner, head of marketing and sales at 21e6, told Bloomberg.
Crypto hedge funds at an impasse
It should be noted that the results differ according to the types of funds. Directional funds, which bet on anticipated market movements, showed signs of weakness.
Despite recording relatively positive performance, however, failed to match the gains generated by bitcoin. At the same time, quantitative funds, which rely on statistical decisions and trading algorithms, have struggled in this volatile environment.
As opposed to discretionary funds, quantitative funds have managed to escape the disruption associated with regulatory uncertainties and banking partnerships. However, they were hampered by market fluctuations.
Although signs of improvement are visible, investor confidence has yet to return to its optimal level, as highlighted in the report. Crypto market participants are watching regulatory developments and market stability closely to guide their future investment decisions.
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