Cryptocurrency-focused hedge funds have reaped windfall profits in recent weeks as Bitcoin surpasses a milestone of $100,000, fueled by a strong rally fueled by Donald Trump’s election victory. .
Funds employing crypto strategies posted gains of 46% in November, taking their year-to-date return to 76%, according to data provider Hedge Fund Research. Its returns have outpaced the industry as a whole, with the average hedge fund up 10% in the first 11 months of this year, HFR said.
Brevan Howard Asset Management and Galaxy Digital, the cryptocurrency investment management firm founded by billionaire Mike Novogratz, have been among the biggest beneficiaries of the recent surge in digital assets. .
The crypto funds’ big rally comes as Trump’s victory in November’s presidential election added new enthusiasm to the year’s rally in Bitcoin, the largest cryptocurrency, and also sent smaller tokens surging. I woke up.
Bitcoin has risen 130% this year to around $100,000, boosting the market value of the leading crypto token by $1.8 trillion to $3.5 trillion, according to the FT Wiltshire Digital Asset Dashboard. Cryptocurrency markets retreated from recent highs this week after the U.S. Federal Reserve announced that interest rates would be lower than expected next year, hurting risk assets.
Investors are betting that the Trump administration’s crypto-friendly nominees for government positions will contrast with President Joe Biden’s administration, which has generally taken a more skeptical approach.
“Trump’s election is good news for digital assets because it means there will be more regulatory transparency,” said Damian Miller, managing partner at macro hedge fund MP Alpha Capital. “It will create a more friendly and collaborative environment for Bitcoin and blockchain.”
Brevan Howard’s flagship cryptocurrency fund rose 33% in November and is now up 51% in the first 11 months of this year, investors said. With $35 billion in assets, Brevan Howard is one of the largest hedge fund managers who is heavily focused on the crypto business he launched in 2021.
Investors say Galaxy’s hedge fund strategy rose 43% in November and is set to rise 90% in 2024. The New York-based group has more than doubled its assets under management to $4.8 billion in the past two years, in part by purchasing assets from bankrupt crypto companies.
Galaxy and Brevan Howard declined to comment on the company’s performance.
The recent surge in digital assets marks a stunning reversal of fortunes for a sector that has been in deep crisis since 2022.
Some content could not be loaded. Please check your internet connection or browser settings.
When Sam Bankman Fried’s FTX exchange collapsed in November 2022, Bitcoin hit a low of around $15,500. Galaxy, which was trying to establish itself as a full-service cryptocurrency financial services company, posted a net loss of $1 billion that year.
The cryptocurrency industry opened the door to new institutional and retail investors in cryptocurrencies in January 2024, when the U.S. Securities and Exchange Commission approved 11 publicly traded Bitcoin funds. BlackRock, the world’s largest asset manager, said last week that it believes “bitcoin should be included in multi-asset portfolios.”
NextGen Digital Venture, a $120 million crypto fund, is up 330% from its launch in March 2023 to the end of November, according to investors. The company benefits from positions in some Bitcoin ETFs, as well as crypto exchange platform Coinbase and software provider-turned-Bitcoin investor MicroStrategy.
“After the Bitcoin ETF was approved, we felt that crypto stocks would be a new opportunity because institutional investors already have access to Bitcoin,” said Jason Huang, founding partner at NextGen Digital Venture.
Coinbase is up about 60 percent since the end of 2023, and MicroStrategy is up over 400 percent.
Some macro hedge funds, which trade macroeconomic trends in currencies, commodities, bonds and stocks, are also increasing their exposure to digital assets in anticipation of favorable market conditions. MP Alpha Capital’s $20 million global macro hedge fund is up more than 30% this year, investors said.
“We’re seeing strong results in digital assets like Bitcoin, Ethereum and Bitcoin miners,” Miller said, referring to companies that complete complex calculations in exchange for tokens. “Over the past 18 months, our entire paper has centered around the institutional adoption of digital assets and the macro context of easy monetary policy, a weak dollar, and a liquidity-rich environment.”
President Trump has signaled that crypto regulation is one of his most pressing priorities, naming venture capitalist and Elon Musk confidant David Sachs as White House crypto czar.
The change in leadership at the SEC, the top US securities regulator, has also been welcomed by crypto enthusiasts.
Current chairman Gary Gensler, who branded cryptocurrencies a “wild west” rife with illegality and risks to investors, will step down when President Trump takes office. He had refused to create rules tailored to digital assets, arguing that many tokens are securities and that existing securities laws were sufficient guidance.
Gensler will be replaced by crypto advocate Paul Atkins.
Still, multiple administrators warned that Bitcoin’s soaring price should cause investors to pause and assess the situation. NextGen Digital Venture’s Huang is long-term bullish on Bitcoin and cryptocurrencies, but said, “Without volatility, assets don’t go up linearly.”
