Morgan Stanley investment bank estimated that during this year around two billion US dollars were invested in hedge funds specialized in cryptocurrencies. The bank estimates this number will be surpassed in 2018.
The aforementioned estimate is based on the research performed by Morgan Stanley and the data provided by the consulting firm called Autonomous NEXT.
To have a better understanding of this number, it is necessary to explain how hedge funds work. Hedge funds are private entities high minimum amounts and high levels of risk. These funds are managed by companies specialized in investments or by investment banks.
The objective of this type of funds is to pursue higher performance than traditional investment funds. The structure of hedge funds includes a general partner that manages the investment assets and limited partnerships, i.e. the investors.
We have seen a large increase in hedge funds specialized in cryptocurrencies. The company called HedgeFundAlert.com recently sent a list of more than 120 hedge funds specialized in cryptocurrencies to its subscribers, which proves that the recent growths of Bitcoin caused great interest among the investors, both institutional and individual.
The great interest can be seen as normal considering the fact that the performance of the cryptocurrency hedge funds began this year at 292% and in November it was at 1641%. The president of the HFR Cryptocurrency Index, Kenneth J. Heinz, says this performance implies high levels of volatility and substantial risks. Heinz also added: “The interest in the hedge funds offering access to the blockchain technology and the cryptocurrencies has increased in the past several months. With the growth and development of these innovations, they will get more recognition from the public and generate attractive opportunities for the investors, wallet managers, merchants and other participants on the market.”