Many Crypto Hedge Funds Seen Closing This Year

At least nine funds that invest in cryptocurrency have already closed since the start of 2018.

by Coins.Online
03 April • 2 min
In News

The cryptocurrency industry, which gained huge popularity last year, has been experiencing troubles lately, as digital coin prices have dropped from record highs and returns are dwindling.

There are 226 exchange traded funds (ETFs) that are focused on investments in digital coins and tokens presently, with 167 emerging only during 2017, according to data from financial research firm Autonomous Research. The industry has some USD 3.5-5 billion in assets under management, it estimates.

However, new capital inflows to crypto funds have slowed as the more than 50% plunge in the price of Bitcoin, as well as the significant drop in altcoin prices, have made both institutional and individual investors more cautious.

four coins with different colors and letters

At least nine crypto ETFs have already closed since the beginning of 2018, including Crowd Crypto Fund, which deleted its website and social media accounts, and Alpha Protocol, which cited regulatory and market risks for its closure, Bloomberg reports. Moreover, up to 10% of all crypto funds are expected to close by year-end, according to Lex Sokolin, global director of fintech strategy at Autonomous Research, as quoted by the news agency.

Another industry insider cited by Bloomberg - Rick Marini, founding partner at Protocol Ventures, a fund that invests in crypto ETFs - believes that only 50 funds will be able to raise enough capital to be sustainable to serve institutional investors.

A major cause for the shrinking ETF industry is related to the falling cryptocurrency prices, which lead to lower returns and hence to lower appetite from investors. The Eurekahedge Crypto-Currency Hedge Fund Index, which comprises nine ETFs, suggests an annual return for the industry of more than 1,700% for 2017, well above the 90% a year earlier. However, crypto funds have achieved a negative return of some 23% so far this year.