Finance
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By
Kevin Helms
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32810
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Hedge Funds Investing in Cryptocurrencies ‘Exploding’ – 62 in Pipeline

With this year’s incredible gains in the price of bitcoin, the number of hedge funds with exposure to cryptocurrencies is “exploding.” Fund administrator MG Stover & Co, accounting firm Auther Bell, and law firm Cole-Frieman & Mallon alone have 62 in the pipeline.

Also read: Hedge Funds Are Quietly Investing in Bitcoin

Exploding Volumes

As the prices of bitcoin and other cryptocurrencies skyrocket, a large number of traders are seeking to launch hedge funds investing in them. Hedge Fund Alert recently reported that “the number of hedge funds investing in digital currencies is exploding.” The publication quoted CPA Corey Mclaughlin, managing member at Auther Bell, who said:

I’ve been in the hedge fund space since 1998, and I’ve never seen anything like it in volume of launches in a particular area. It’s just crazy.

Hedge Funds Investing in Cryptocurrencies 'Exploding' - 62 in PipelineMatt Stover, founder of MG Stover & Co, shared the sentiment. “This is the first time I can remember where we have had a hard time keeping up with the sales calls,” he said.

Institutional investors are surprisingly interested in cryptocurrencies, according to hedge fund lawyer Karl Cole-Frieman. “I wasn’t expecting so many institutional players to be interested in the asset class,” he was quoted saying. Recently, news.Bitcoin.com reported that hedge funds are quietly investing in bitcoin. With this year’s explosive gains in the price of bitcoin, Hedge funds that offer cryptocurrency exposure are seeing windfall gains.

62 Hedge Funds in the Pipeline

Among client funds administered by MG Stover & Co., 12 of them are running digital-currency strategies. The firm has also made agreements to service 25 more, the publication detailed. Arthur Bell is working with about 15 fund managers on cryptocurrency funds and expects to take on 20 more in the near future. Meanwhile, Cole-Frieman & Mallon has helped set up 7 cryptocurrency funds this year and has 17 more in the pipeline. Altogether, 62 new cryptocurrency hedge funds will be brought the market by these three firms alone.

Demand for Hedge Funds Investing in Cryptocurrencies 'Exploding' - 62 in the PipelineAmong the new entrants, there are both those simply taking long bets on bitcoin as well as those “devising hedge fund-like strategies, such as capturing the arbitrage among various currencies,” the publication conveyed. Bitcoin’s value has risen over 200% this year.

“I think the majority of these cryptocurrency [funds] are trying to ride the opportunity du jour,” noted Neal Berger, founder of investment advisory firm Eagle’s View Capital. “It’s an access point for people who can’t buy it themselves or don’t want to learn how to do it.” Former Goldman Sachs executive Matthew Goetz, co-founder at Blocktower Capital, described:

It’s a wildly inefficient market where alpha potential is abundant — more than anything we’ve seen in our careers. We think it’s a rare opportunity for investors. It’s not often there’s a new capital market being born in front of you.

How do you think the many hedge funds entering the space will affect the price of bitcoin? Let us know in the comments section below.

Images courtesy of Shutterstock

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  • Reuel Leach

    Its the way the world works. Crypto is no longer just Bitcoin. Bitcoin has its value because it is the first, but all the children of Bitcoin are running not just a two-sided coin, but a multidimensional way of looking at gaps in the market and taking it one step further to give it a futuristic value. We will invest in companies that dont steal from us, but give us privacy and pay us more than we pay them for our contributions. Some of these ‘coins’ will fade away in time but so does the real world sort the survivors from the non-survivors. We are excited about the potential of these currencies not just at their value in the marketplace but as Traders buying these new Penny Stocks and keeping them for months and years

    • gotroch

      You are, I believe, wrong in you perspective. Segwit activation in BTC case shows BTC is not longer a technology but a “trademark”, “brand”. Community is strong enough to act in a way to protect bitcoin. If an altcoin would be technologically much better then BTC in a way to truly endanger BTC position, then BTC community would protect BTC by implementing that technology, even if hard-fork would be needed.

      Now it is Bitcoin and nothing else.

    • Viesturs Š Plešs

      +1

  • I think the big question to answer is, will hedges HODL or will they buy Altcoins on margin then flush to Bitcoin and dump? Hedges have to perform on a quarter and would demand stability in evaluation and more important deliver gains. More short action to come if they get in. I think they will be disappointed and will have to HODL on value as BTC will continue to rise. Look at OPEC, they tried with huge success to convince the world that the supply of oil was limited. Arguments, ensue. But, new oil sources are found everyday since Oil Refiners went from production to exploration. Without sanctions on so-called rouge states the price would be way under 25USD a barrel. Kinda similar to going altcoin because the equipment and infrastructure is more conducive to cross coining(anytime change to other algorithms). I think the entrance and interest of hedges is better news for altcoins than it is for BTC in the long term. The article included such sentiment, “Among the new entrants, there are both those simply taking long bets on bitcoin as well as those “devising hedge fund-like strategies, such as capturing the arbitrage among various currencies,”. “. Arbitrage the Altcoins…. After a few wild rides the Alts rise and close the distance while the dumps on BTC simulate a stability until hedge entrances calm. Time will probably be in a years time and a wild ride. While this is happening, watch Gold!

    • Dr. Bubó

      Trading altcoins in large quantities on margin = quick suicide. Who would do that?

      • They wouldn’t do that. A more complex arbitrage than a textbook description. I think they would need inside intelligence, forming relationships, modelling, and most likely someway to become adverse when the advantage plays out from time to time. I am certain they will fold many products together that may model the same. I would love to see the first prospectus from a viable hedge.

        • Dr. Bubó

          Yeah, russian rulette you mean? Like LTCM?

          • Yep, some lessons are never learned. They are replayed. The roulette may wind up on regulation of of hedge products.

  • bitfur

    I think sooner we see the price up of Alts too in big amount
    LTC 100-150
    ETH 800-1000 ,
    Dash 600-1000
    Zcash 750 +
    Ripple around 1 -1.5

    XMR 150-200

  • Evan Wilder

    Now, hedge funds are being made. Says a lot about the legitimacy of cryptocurrency in the mainstream nowadays. 🙂

  • David

    Explosion 💣