Crypto Hedge Funds Struggle with Performance and Banking Difficulties
According to data from 21e6 Capital AG, around 13% of crypto hedge funds have shut down this year due to weak performance and difficulties in accessing banking services. Here are the key points:
1. Lagging Performance: Crypto hedge funds have been underperforming Bitcoin, which gained 77% in the first half of 2023. Funds with market-neutral strategies performed the worst, generating only a 6.8% return.
2. Banking Challenges: Many funds are still struggling to find new partners for banking services. The collapses of crypto-friendly banks Silvergate Capital and Signature Bank have further compounded the banking problems.
3. Regulatory Pressure: Regulatory pressure and America’s SEC-led war on crypto have also hindered the success of crypto hedge funds.
4. Fund Closures: 97 out of the 700 crypto hedge funds tracked by 21e6 Capital have closed in 2023. Some of these closures were a result of the fallout from the FTX collapse.
5. Investor Confidence: While investor confidence has slightly improved, fund inflows and launches do not yet indicate a full recovery in sentiment.
Crypto Market Outlook
Currently, digital assets remain relatively stagnant, with total capitalization at $1.2 trillion. Bitcoin and Ethereum have experienced a slight retreat but remain within their range-bound channels. Trading volumes and volatility are at historical lows, contributing to the prolonged crypto winter.
Hot Take
Crypto hedge funds are facing significant challenges with lagging performance and banking difficulties. While the overall market outlook remains relatively flat, the struggles of these funds highlight the need for regulatory clarity and improved banking support for the crypto industry.
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