Is it hard to perform in bull markets?
2018, on the other hand, has seen a significant downturn in many of the cryptocurrencies. Many of these coins make up a strong percentage of most of the crypto hedge funds. So-called ‘diversified portfolios’, or ‘risk mediation in coin-bundles’ underperformed greatly. Investors money is still tight up unless sold at loss. With YTD 2018 Returns of -56.78%, investors consider alternative option within this disruptive, high growth technology space.
Cryptocurrencies are speculative in value.
By now, most should know that the majority of token and coins stand and fall with Bitcoin performance due to strong correlations. Additionally, with an average of 50% of the total crypto market share, Bitcoin is certainly the dominant driver in overall behavior. Furthermore, crypto is a young asset class and will likely continue to be volatile as it matures. Bitcoin dwarfs the volatility of equity coming in at 70% (down from 150% earlier in the year).
Total market capitalization rose from $18.3B at the start of 2017 to $613B by the start of 2018 — over 3000% growth. The market for cryptocurrencies is rapidly changing, presenting huge opportunities for investors, and in turn, investment managers. But, individuals looking to capitalize on the inefficiencies of the market by offering interests in actively managed hedge funds need to be wary of and disclose the associated risk.
Damage Limitation
Due to the 70–90% corrections from all-time highs in 2017, a majority of crypto funds will most likely not make any performance fee last year, despite their “complex hedging strategies” or automatically re-balanced functions.
This means they had three (no, 4) options for the rest of the 2018 fiscal year:
- Raise New Capital,
- Ride the market out and hope 2018 is better,
- Close the fund
- or change strategy.
“Cryptocurrency cannot be analyzed in the same manner as traditional assets.”
There is no physical item or stake in the startup or company to which the price is tied. The valuation of your token is based on the expectation of future demand and is thus very susceptible to changes in sentiment.
Hedge funds are the most common type of digital asset fund, but venture capital crypto funds are launching quickly. Existing tech/FinTech VC firms are expanding investments into blockchain startups and launching their own blockchain funds. Investing in technology startups — instead of solely relying on price appreciation of existing crypto-assets — serving investors the most disruptive, high growth market, worth trillions in the future.
What will 2019 bring?
We are approaching the end of January and there have been plenty of predictions of what this year could mean for cryptocurrencies. Some claimed that this could be the year for security token offerings (STO). some say it could be the year mass adoption will finally take place.
My thoughts on the matter are, 2019 could be the year when regulations finally build an infrastructure for cryptocurrencies or blockchain-based projects to thrive. The road is long but nothing can stop innovation. It is the single most consistent growth humanity has offered since maybe the dawn of time.
Originally posted on Hackernoon.
Looking for an STO Consultant?
Moonwhale Ventures position ourselves to provide STO solutions, helping businesses with our STO Financing service. Based in Delaware, USA, Moonwhale will assist you in One-Stop-Shop solution for your security token offering:
- Token Economics
- Token Creation & Issuances
- Marketing Materials
- Private Sale Fund Raising
- Public Sale Fundraising
- Secondary Market Trading
Please feel free to contact us. For more information on STO, here is our What Are Security Token Offerings? or Tokenizing Commercial Real Estate.
About The Author:
Danny Christ is the CEO & Co-Founder of Moonwhale Blockchain Ventures Inc.