By Alex Lielacher
The exuberant rally in cryptocurrencies since the start of the year has sparked an increased interest in Bitcoin and its peers among private investors.
This development has also raised eyebrows in the institutional investor community, which is finally coming around to accepting bitcoin and other digital assets as a viable asset class with very high returns potential for its investors. As a result, digital currency-focused hedge funds have been launched to capitalize on this new investment opportunity.
Meet the New Digital Currency Hedge Funds
In July 2017, former investment banker and author of the book Blockchain RevolutionAlex Tapscott announced that he has closed an oversubscribed $20 million financing round for his new digital asset investment fund called NextBlock Global. Tapscott believes that “NextBlock Global has the experience, market access, strategy and domain expertise to achieve that better future, and we are excited to share that journey with all of our partners and investors. This is only the beginning."
In January 2017, the Cayman Islands-based AlphaBit Fund was launched to apply an array of different trading strategies to the crypto assets market. AlphaBit was founded by CEO Liam Robertson with the intention to invest in bitcoin and other digital assets through a combination of opportunistic trading, algorithmic trading and purchasing of initial coin offering (ICO) tokens. AlphaBit has already invested in ether, ark, ether classic, peercoin, aeternity, skycoin and matchpool, among others. The fund has already managed to raise over $12 million and targets $300 million assets under management (AUM).
Brian Kelly Capital Management
In March 2017, portfolio manager and CNBC Fast Money commentator Brian Kelly started his own digital assets fund named Brian Kelly Capital Management. Kelly launched the fund with his own funds originally but has since opened the fund to outside investors. Kelly aims to raise $50 million from high net worth individuals and family offices for his venture.
The BKCM Digital Asset Fund invests in exchange-traded digital assets and has already made notable investments in bitcoin, litecoin, ripple and Zcash, among others.
Crypto Assets Fund
In July 2017, Roberto Ponce Romay, a former Bain & Co. senior manager, launched a digital assets fund targeted at investors in South America. The fund invests in a range of digital assets and was initially launched with $10 million AUM. Romay aims to reach $50 million AUM before the end of the year. The Crypto Assets Fund is the first fund that allows wealthy South Americans to partake in the digital asset market.
While 2017 is witnessing a wave of new digital currency hedge funds hitting the market, a few brave fund managers had already ventured into this space in prior years.
In September 2016, entrepreneur Olaf Carlson-Wee launched the cryptocurrency investment fund PolyChain Capital, which amassed over $200 million AUM. Backers of the fund include leading venture capital companies Andreessen Horowitz, Union Square Venture and Sequoia Capital, among others.
MetaStable Capital is a California-based hedge fund that was launched in 2014 to invest in a range of digital assets such as bitcoin and other digital currencies.
The hedge fund currently offers two funds: MetaStable Edge and MetaStable Balanced. MetaStable Balanced holds a range of different cryptocurrencies to provide investors with a diversified portfolio of digital assets, while MetaStable Edge is targeted at investors who already hold bitcoin but want to extend their digital asset portfolio to new tokens that arise from promising new ICOs. MetaStable’s funds minimum investment requirement is $1 million.
Institutional Money Will Likely Drive Digital Asset Values to New Highs
So far, the majority of investors in the digital assets space have been retail investors and high net-worth individuals that are involved in the cryptocurrency community, while the involvement of institutional investors has been fairly limited until now.
However, as this is about to change, that means that the new institutional money that will flow into bitcoin and its digital peers will most likely give cryptocurrencies a major boost that will push their prices to new all-time highs given the relatively small market capitalization of most digital assets.