One in Five Hedge Funds Launched in 2018 are Crypto Funds

Crypto hedge fund launches seem to be spiking to an all-time high, with an October 10 release from Crypto Fund Research reporting that 90 cryptocurrency hedge funds launched in the first three quarters of 2018, on track for 120 for the fiscal year.

A Record Rate of New Crypto Hedge Fund Launches

(Source: Beck Capital Management)

It seems that the bear market that has dominated cryptocurrencies in 2018 did little to stop the industry from booming. According to an October 10 report from Crypto Fund Research, crypto hedge funds launches are spiking to all-time highs, with 90 crypto funds launched in the first three quarters of 2018.

The total, however, is expected to be much higher, as the report expects an additional 30 funds to be launched until the end of the year. As around 600 hedge funds of all types are expected to launch in 2018, the predicted 120 crypto-focused funds will comprise a notable 20 percent of that total.

The number of crypto hedge funds has skyrocketed since the beginning of 2017, mirroring the increase in investor awareness of the industry. According to Crypto Fund Research, crypto hedge funds accounted for 16% of new hedge fund launches in 2017, up from less than 3% in 2016.

A Small Piece of a Big Pie

Hedge fund launches by year

(Source: Crypto Fund Research)

While crypto hedge funds are by far the fastest growing hedge fund strategy, they still make up a small percentage of the overall industry, both in terms of raw numbers as well as assets under management.

Crypto Fund Research reported that there are currently 303 registered crypto hedge funds. The report found that these funds invest largely, or sometimes even exclusively, in cryptocurrencies like Bitcoin, Ethereum, and Ripple, while a small percentage of them invest and trade in ICOs.

However, despite the large number, these funds comprise just 3% of the more than 9,000 hedge funds currently in operation. The assets these funds hold are also meager by comparison, with the report stating that crypto funds manage less than 4$ billion in congregate. The global hedge fund industry, by comparison, manages more than $3 trillion.

Joshua Gnaizda, founder of Crypto Fund Research said that crypto hedge funds are a notable aberration from the market, as 2018 has seen a decline in traditional hedge fund launches.

“Yet these seemingly unfavorable market conditions have not deterred managers from launching new crypto hedge funds at a record pace. While we don’t believe the rate of new launches is sustainable longer-term, there are currently few signs of a significant slowdown,” Gnaizda said in the company’s report.

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