Crypto hedge funds have demonstrated a notable recovery, averaging a 44% return for the year within the period ending December 20, bouncing back from a challenging 52% loss in 2022. In contrast, passive crypto funds had previously outperformed with an impressive average return of around 265%. Despite this resilience, the industry has faced closures, with approximately 250 out of 712 crypto hedge fund companies shutting down over the last 18 months.
Despite setbacks in the crypto hedge fund industry in 2022, many funds are not only recovering but also thriving. A prime example is Dan Morehead’s Pantera Capital, one of the sector’s leading and long-standing funds.
Pantera Capital’s liquid-token fund recorded a remarkable recovery, gaining about 80% for the current year after an 80% drop in 2022.
Chainview Capital, managed by the young and dynamic Dan Slavin, also witnessed a significant recovery. After an 18% drop the previous year, the fund doubled its performance, showcasing the resilience and adaptability of some crypto hedge funds.
Stoka Global, specializing in altcoin investments, reported a notable 268% gain for the year as of November 30. Founded by Naveen Choudary, with a background in technology investment banking at Goldman Sachs Group, the fund’s success highlights the variety of strategies in the crypto hedge fund landscape.
While average fund performance has not matched Bitcoin‘s impressive rise of over 150% this year, the turnaround is significant for a sector still recovering from the previous year’s FTX collapse. The FTX failure, combined with a wave of redemptions and challenges in accessing banking services, led to the closure of about a third of all crypto hedge funds.
Firms that have overcome these challenges are now preparing for a promising 2024. Optimism surrounding potential approvals of exchange-traded funds (ETFs) directly tied to original cryptocurrencies and the continuous rise in Bitcoin prices are significant factors contributing to this positive outlook.
As 2024 approaches, some in the industry express optimism, anticipating a revival of the token frenzy experienced three years ago. The potential approval of ETFs in the United States and the opening of new investment avenues in the crypto space strengthen this sentiment. Chainview Capital’s Dan Slavin suggests that another token craze seems likely, drawing parallels between the current market atmosphere and the one preceding the explosion that drove Bitcoin to record levels three years ago. Consequently, the crypto hedge fund industry, having overcome significant challenges, is gearing up for a strong comeback, with renewed investor confidence and favorable market dynamics pointing towards a bright year in 2024.