A report from Crypto Fund Research indicates that 90 crypto hedge funds have launched so far in the first nine months of 2018, with an extrapolated projection of 120 new crypto hedge funds in 2018. In general, there are 600 new hedge funds launched per year, so crypto oriented hedge funds represent 20% of all new hedge funds. This is a solid indication of how the crypto space is becoming relevant to mainstream investors.
The acceleration of the startup of new crypto hedge funds is remarkable. In 2016, less than 3% of all new hedge funds were crypto oriented; a year later this grew to 16% and now that number has swelled to 20%. Most new funds are in the United States, with some launching in Australia, UK, Malta, Switzerland, the Netherlands and China.
In total, there are 303 crypto hedge funds with aggregated assets of USD 4 billion, according to Crypto Fund Research. However, there’s an even larger amount of crypto funds when including venture capital and private equity, with 622 crypto funds in total.
Perhaps even more remarkable is that in general, fewer hedge funds are being launched, yet the number of new crypto hedge funds continues to accelerate. Founder of Crypto Fund Research, Joshua Gnaizda, says, “In the midst of 2018’s decline in traditional hedge fund launches, crypto hedge funds are a notable aberration… 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.”
Crypto hedge funds are a critical piece of infrastructure which facilitates institutional investment, along with cryptocurrency custodians like Coinbase, Xapo and BitGo. It is certainly a positive sign that the crypto hedge fund infrastructure is rapidly expanding, and is setting the stage for a major crypto rally fueled by institutional investors.
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