The cryptocurrency market suffered a crisis in the first trimester of this year. According to a recent study, some cryptocurrency hedge funds benefited from this drop in the market capitalization, even more than when the cryptocurrency market was experiencing a big growth.
Bloomberg published a report in which it pointed out the reverse correlation between the earnings generated by the cryptocurrency hedge funds and the price of Bitcoin during the first trimester of 2018. In comparison with 2017, this could be a change of direction.
The report points out the case of the Pivot Digital Trading-2 fund from Hong Kong. This fund generated some of the highest earnings among the cryptocurrency funds that avoid directional bets. This fund increased its earnings by more than 4% in March and achieved a 30% return during the first quarter of this year. The fund is administered by Amber Al Group and its goal is to create markets, follow short-term trends and exploit the price divergence between currency pairs and exchange platforms.
Likewise, SP-Institutional, a company from the Cayman Islands, presented earnings of 5.6% in the first quarter of this year, according to Cedric Jeanson, an investment advisor at BitSpread Group.
The report affirms that the executives of these non-directional hedge funds could be taking advantage of the swings in the price of Bitcoin and the rest of the cryptocurrencies to generate earnings and protect their investors from the volatility of the market: “The results suggest some managers are finding ways to profit from wild swings in cryptocurrencies without having to predict whether the coins will rise or fall. Such tactics may appeal to investors who want exposure to digital assets without their extreme volatility.”
Silver 8 Partners dropped 25% in March and 32% in the first quarter of this year. The fund invests in digital assets, FinTech, blockchain and machine learning companies. They sent a newsletter to the investors explaining the situation: “High levels of uncertainty and low market liquidity make investments in blockchain-related assets volatile. They tend to overreact to cycles of euphoria and pessimism, where the market price itself acts as a catalyst for further momentum.”
A hedge fund is a financial instrument for investments that is designed with the goal of offsetting the potential losses and protecting the investors and their investments. These funds are usually administered by brokerage companies, investment banks or fund managers.