Encryption Hedging Fund Market Analysis: Asset Scale Rise and Investor Structure

A recent survey report delved into the development status of hedge funds in the cryptocurrency market. The data shows that the assets under management (AUM) of crypto hedge funds rose significantly in 2019, jumping from 1 billion dollars at the end of 2018 to 2 billion dollars.

In the overall performance of 2019, fully managed long funds stood out, with an average return of 42%. It is noteworthy that the investor composition of these funds shows distinct characteristics: family offices account for 48%, and high-net-worth individuals account for 42%, together forming the main body of investors.

An industry expert pointed out that since the outbreak of the COVID-19 pandemic, people's interest in encryption has shown a broader trend.

Surveys show that there are currently about 150 active encryption hedging funds, with more than 60% established in 2018 or 2019. This phenomenon is highly correlated with the price trends of Bitcoin, as the surge in Bitcoin prices in 2018 became a significant factor driving the establishment of cryptocurrency funds.

The report categorizes cryptocurrency hedge funds into four types: fully delegated long, fully delegated long/short, quantitative funds, and multi-strategy funds. Among them, quantitative funds are the most common, accounting for nearly half of the market.

In terms of investment scale, encryption hedging funds exhibit a typical "long tail" distribution, with a few large funds managing the majority of assets. In 2019, the proportion of encryption hedging funds with assets under management exceeding $20 million rose from 19% in 2018 to 35%.

In 2019, the median performance increase of encryption hedging funds reached 74%, far exceeding the negative 46% of 2018. By investment strategy, fully delegated long-only funds performed the best, with a median return of 40%.

As the encryption derivatives market develops, the investment strategies of encryption hedge funds are becoming increasingly diversified. Surveys show that 48% of the surveyed funds hold short positions, and 56% use derivatives. In terms of leveraged trading, the proportion of funds using leverage rose to 56% in 2020, but only 19% are actively using it.

In the future, with the maturity of the market and the improvement of regulations, it is expected that more encryption hedging funds will engage in derivatives trading, and the investment strategies of encryption hedging funds will increasingly converge with those of traditional hedging funds.