Crypto Hedge Funds Underperform Bitcoin in the First Half of 2023
Even though crypto hedge funds managed positive returns during the first half of the year, bitcoin trounced them, according to a 21e6 Capital report. Investors would have benefited more from buying and holding bitcoin (BTC) than from investing in crypto hedge funds during the period.
Key Points:
– Crypto hedge funds returned an average of 15% during the first half of 2023, while bitcoin gained 83%.
– Funds with directional strategies returned an average of 22%, still below bitcoin’s performance.
– Market-neutral strategies, which attempt to follow market trends, only returned 6.8%, highlighting the difficulty in choppy markets.
– Challenges faced by crypto hedge funds included the sudden closure of FTX, the closure of three crypto-friendly banks, and ongoing regulatory turbulence.
– More than 13% of crypto hedge funds have closed down due to underperformance.
The underperformance of crypto hedge funds can be attributed to several factors. The collapse of FTX led to slower reaction times as funds held larger-than-typical cash positions to mitigate risks. Additionally, the underperformance of altcoins, or cryptocurrencies other than bitcoin or ether, also impacted hedge fund returns.
In conclusion, the first half of 2023 proved to be a challenging period for crypto hedge funds. Bitcoin outperformed these funds significantly, leading to the closure of a significant number of underperforming funds. Investors would have been better off buying and holding bitcoin during this time.
Hot Take: The underperformance of crypto hedge funds compared to bitcoin highlights the challenges faced by these funds in a volatile and rapidly changing market. It also emphasizes the potential benefits of a simple buy-and-hold strategy for individual investors.
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