Crypto hedge funds that weathered the bear run of 2022 are not just recovering but thriving in 2023. Bloomberg reports unveiled the notable success of crypto market which includes institutions such as Sequoia, OKX, Circle and Pantera Capital, one of the industry’s pioneers, whose liquid-token fund witnessed an impressive 80% surge as of mid-December
Chainview Capital, led by 31-year-old Dan Slavin, has bounced back and doubled its value after an 18% decline in 2022. Stoka Global LP which is focusing on altcoins has boasted a remarkable 268% gain by the end of November.
According to a Bloomberg index, crypto hedge funds returned an average of 44% in 2023, a significant improvement from the 52% loss they experienced in 2022 although it falls short of Bitcoin’s amazing 150% rally. This positive shift comes as a relief for an industry grappling with setbacks including FTX’s collapse and its consequences that led to the closure of about one-third of all crypto hedge funds.
Despite the bear market, surviving funds are optimistic about a prosperous 2024. The prevailing elevated price of Bitcoin over the past months coupled with expectations of US approval for exchange-traded funds has set the stage for a potential resurgence.
Dan Slavin of Chainview Capital predicted another “token mania” in memory of the market sentiment exactly three years ago. The crypto market’s current signal with some affordable hedging, suggests a favorable environment for investors. Slavin expressed his optimism highlighting the parallels with the period preceding Bitcoin’s record highs.
Reflecting on 2023, Slavin acknowledged it as a “dream year” and revealed plans to expand his team, indicative of the positive trajectory. The overall sentiment among crypto hedge funds seems to be positive, with survival being considered as a significant accomplishment itself.
While the Bloomberg index’s 44% average return leads among 29 strategies, it still lags behind Bitcoin’s gain by approximately 120 percentage points. Passive crypto funds, on the other hand, outperform actively managed ones, posting average returns of about 265% in the past year.
Survival in this dynamic market is no small feat, as evident from the closure of approximately 250 out of 712 crypto hedge-fund firms tracked by Galaxy Digital’s VisionTrack over the past year and a half. The collapse of Galois Capital’s flagship fund and the fallout from FTX’s demise have further highlighted the challenges faced by the industry.
The second half of 2023 brought a positive shift, with crypto markets rebounding, fundraising for active funds picking up, and new fund managers entering the market. The conviction of FTX founder Sam Bankman-Fried in November contributed to a “collective sigh of relief” and increased interest from prospective investors.
As Pantera Capital positions itself for a bullish ride in 2024, the focus shifts to altcoins. Cosmo Jiang, a portfolio manager at Pantera, suggested that the industry might enter the second part of the cycle where token selection becomes crucial.
Earlier this year, a major fundraiser was held to start off 2023. Reports suggest that the cryptocurrency fundraising market saw an increase in donations, totaling more than 160 million dollars. Various sources contributed to the funding, including Sequoia, a16z, Circle, Kycoin, OKX, Polychain, and others.
The donations were given to several cryptocurrency initiatives, including LayerZero Labs, which received an astonishing $120 million. Polyhedra Network received $15 million, while Bitget and IOST each received $10 million. Other crypto firms, such as Roseon Exchange, Ens.vision, Kryptview, and Halo Wallet, also received sizable contributions.
