Remember 2017? 20k Bitcoin, the golden age of ICOs, and lots of newcomers entering the market. Apart from developers, startups, and trader-wannabes, some major players like cryptocurrency funds turned their eyes to the possibilities that the crypto industry potentially held. Obviously, cryptocurrency investment funds existed before the 2017 blockchain boom, but that time was clearly a high point.
Establishing more than two hundred funds, including crypto hedge funds and venture capitals, already seems impressive and rather risky. And yet the next year, despite Bitcoin’s declining trend, even more crypto funds rose to the challenge. Apparently, only 150 of them managed to make it all the way through 2018, survive significant asset drops (more than 40%), and live until the 2019 spring recovery. Even still there are some who claim the remaining crypto funds are quite a risky business.
In continuation of our crypto fund research, let’s take a closer look at the typical structure of these enterprises. Crypto hedge funds and venture capitals (although, sometimes it’s really hard to tell the difference) are in the majority, and only a few private equities have entered the field. Typically, most cryptocurrency funds are relatively small, holding only $10 million or less and consisting of a few employees, usually less than 5. More than half of them are located in the United States.
Cryptocurrency Investment Funds
Let’s start our crypto funds list showing off the big guns.
As Investopedia puts it:
“The two largest players are Silicon Valley-based Pantera Capital and Polychain Capital, the latter of which is backed by well-respected VCs, Andreessen Horowitz and Sequoia Capital.”
Founded in 2016 in California, Polychain Capital is probably the world’s largest crypto fund with, according to Bitcoin Market Journal, over $1 billion under management. But, apparently, the so-called crypto winter affected it too: last spring the company announced a 40% drop in their assets under management, totaling up to $591.5 million. The fund is mainly interested in cryptocurrency protocols.
Pantera Capital was founded in 2013 in California and later on switched its focus exclusively to blockchain projects. Pantera is a digital asset hedge fund with $810 million in assets under management. Their portfolio consists of well-known names like Bakkt, Bitstamp, Brave, ShapeShift, etc. In July 2018 Pantera claimed that since the funds’ establishment it had succeeded in generating a lifetime return of more than 10,000%.
BlockTower is another addition to our cryptocurrency hedge fund list. They describe themselves as a ‘leading crypto asset investment firm, applying professional trading, investing and portfolio management to an emerging digital asset class.’
With $454 million in committed capital (at 2018), this Silicon Valley early-stage venture capital fund seems to be one of the most efficient ones. They invest in all sorts of projects worldwide and their blockchain portfolio includes BlockCypher, Hijro, Libra Credit Network, and others.
Alphabit is a crypto hedge fund that aims to navigate its customers through the world of digital assets. As they say it themselves, their goal is to ‘beat the performance of Bitcoin on a risk-adjusted basis.’ This cryptocurrency fund has approximately $500 million in assets under management and its portfolio includes Cred, Metal, ælf, and other big-league blockchain projects.
Digital Currency Group
Digital Currency Group is a New York-based fund dedicated to ‘incubating, building, and operating businesses that provide a variety of financial and professional services to financial institutions, corporations, and startups.’ In 2016 they acquired CoinDesk. In 2018, the crypto fund was managing almost $2 billion and their portfolio was pretty impressive.
Arrington XRP Capital
Arrington XRP Capital is a Seattle-based crypto hedge fund that was founded two years ago. Their portfolio consists of many well-known crypto projects like Nexo, Telegram, and others. An interesting feature about Arrington is that they denominate the fund in XRP. According to the founder Mr. Arlington himself, it was a well-weighted decision:
“It’s a fantastic way to move money cross-border, very quickly, at almost zero cost.”
Two-year-old Californian company Protocol Ventures is a ‘leading fund of funds in the crypto asset class,’ that is particularly interested in investing in other funds. Their portfolio is all about funds that invest ‘exclusively in highly liquid crypto assets and ICOs.’
There’s no such thing as the best crypto fund since everything is rather subjective. Some of these funds fail miserably, while others manage to weather all the challenges. A certain number of experts remain skeptical about whether or not these funds will eventually succeed. We’d say the best way to judge these establishments is through the number of successful startups they’ve managed to thrust forward.