Crypto Funds Struggle to Survive
In 2023, the crypto industry has faced a crisis as 13% of all crypto funds have collapsed. These funds have encountered regulatory uncertainties and difficulties in attracting investors and banking partners.
- Increased chaos in the crypto industry has made it difficult for funds to lure investors.
- 97 out of over 700 crypto funds have closed shop.
- Crypto funds generated a 15.2% return in the first half of the year, underperforming Bitcoin’s 83.3% gains.
- Hedge funds held more cash reserves after the FTX collapse, missing out on the Bitcoin surge.
- Only 31% of crypto funds had significant exposure to Bitcoin.
Directional Funds Fail to Catch Up with Bitcoin
Directional funds, which implement tactics in response to expected market changes, have outperformed their non-directional peers, but still significantly underperformed Bitcoin.
- Non-directional funds had an average return of 6.8% from January to June.
- Directional funds had a return of 21.9%.
- Investor confidence has been impacted, causing cash inflows and new fund launches to dwindle.
- The “quantitative directional” approach, employing trading algorithms, has been the least successful in 2023.
- Erratic market signals have led trading algorithms to follow sub-optimal strategies.
Hot Take
The collapse of crypto funds in 2023 highlights the challenges faced by the industry, including regulatory uncertainties and missed opportunities. While directional funds have performed better than their non-directional counterparts, both have struggled to keep up with Bitcoin’s gains. Investor confidence has been affected, leading to a decline in cash inflows and new fund launches. The industry needs to address these issues to regain trust and attract more investors.
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