In a recent research report, an investment firm has revealed that crypto hedge funds haven’t stood up to the expectations. Reportedly, the crypto hedge funds have recorded underperformance this year.
According to a recent research from a Swiss investment advisory firm, the crypto hedge funds have faced an array of this year leading to its underperformance. Data suggests that around 13% of crypto hedge funds have already shut down so far this year.
Reportedly, the prime reasons for the closures were weak performance and difficulties in accessing banking services. The performance of the hedge funds have been significantly down especially when compared to Bitcoin, the largest cryptocurrency by market capitalisation.
The report briefs that the crypto funds on average generated around 15% returns in the first half of the year. In comparison to Bitcoin, the figures are severely low as the asset has gained over 77% in the same period.
Further, shedding light on the primary issues that the crypto funds have been facing, the report states that the accessibility to banks in on the top of the list. This stands in clear contrast to the common talk that has been surfacing claiming that majority of banks are crypto friendly whereas the visible reality is very different for many crypto hedge funds.
Additionally, the firm reported that many funds held larger-than-normal cash positions following industry turmoil that happened last year. Hence, as a result, they missed out on Bitcoin’s big moves earlier that year.
Maximilian Bruckner, head of marketing and sales at the firm said that many funds are still struggling to locate new partners to execute banking services. Notably, the banking problems were compounded by the collapses of crypto-friendly banks Silvergate Capital and Signature Bank earlier this year.
Simultaneously, increasing regulatory pressure and United States Securities and Exchange Commission’s (SEC) war on crypto haven’t helped their causes. According to the report, over 97 of the 700 crypto hedge funds that it tracked have closed this year. Additionally, a significant number closed following the fallout of the FTX collapse, where many had stored their funds.
The report added that over all the strategies have been largely positive but those with “market-neutral strategies” have performed the worst this year, generating only a 6.8% return for the first half of this year. The report concluded:
All crypto fund strategies achieved positive results this year. But relative to Bitcoin, they underperformed, especially those with significant exposure to altcoins, to futures, or those strongly dependent on momentum signals.
Further, the report touched on the investor sentiment following the collapse and turbulence that was witnessed last year. Reportedly, there has been some positive news on the sentiment angle but it’s still far from a perfect picture.
Investor confidence improved slightly, but fund inflows and fund launches are not yet signaling a full recovery in sentiment.
As of writing, there has been very little movement in total crypto market capitalisation, as it remains at $1.2 trillion. However, there has been a slight retreat for BTC and ETH this week, with both dropping a couple of percents but remaining with their respective range-bound channels signaling overall positive performance in the past weeks.
In the context of this report, it is no surprise that the performance of crypto funds lies much behind Bitcoin given the asset’s performance and investors’ optimism. As reported by Todayq News trading volumes and volatility are currently at historical lows in this, the longest-ever crypto winter in industry history.