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The decline of the crypto market decline seen as an investment opportunity by hedge funds

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Redakcja
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5 min reading

From stabilizing cash position to declaring new investment products, hedge funds seem unbothered by the present crypto market decline. Crypto capitalization is decreasing more than 40% since its $2.5 trillion high back in early May, even after this institutional investor continue to pile into the market.

From stabilizing cash position to declaring new investment products, hedge funds seem unbothered by the present crypto market decline. Crypto capitalization is decreasing more than 40% since its $2.5 trillion high back in early May, even after this institutional investor continue to pile into the market. Even though Bitcoin (BTC) is losing over half of its United States dollar value and altcoins decreasing almost by 70% on average, big-money investors like hedge funds are still accepting the digital currency investment positions. 

From direct exposure to crypto backing firms are creating products and services in the digital asset space, institutional investors are creating a more significant effect in the cryptocurrency and blockchain space. During June, a survey was conducted of 100 chief financial officers at hedge funds all around the world pointing out an increase in crypto exposure for hedge funds in the coming five years. The trained entities continue to examine digital currency investment options, crypto rules seem to be taking part in many jurisdictions. However, in the U.S regulators such as the securities and Exchange commission are coming under serious pressure to put out a stricter and more legal substructure for cryptocurrencies. 

During the early July, there were reports stating that London-based hedge fund giant Marshall Wace is focused on building an investment portfolio focused on digital assets. Based on the report, the $55 billion hedge fund was facing towards the late-stage funding for digital finance companies and blockchain outfits working on use cases such as payment systems for digital currencies and stablecoins. According to Amit Rajpal, CEO od Marshall Wace Asia Limited, defined the company’s digital asset investment thesis, pointing out that the focus is on projects working toward designing a new financial service, most importantly in the area of payments. Rajpal also believes, digital finance is already transforming the architecture of the underlying financial system. 

Way before the reports of its crypto-focused investment portfolio emerged, Marshall Wace had created some incursion into the digital asset space. Back in May, the hedge fund participated in USD coin (USDC) stablecoin issuer circle’s $440-million fundraising round. Marshall Wace is termed as the latest in growing list of hedge funds and other institutional investors and knowing crypto investment options. During April, United Kingdom based asset management outfit Brevan Howard levitated an $84-million crypto investment fund. 

Emin Gun Sirer a Cornell University professor and Avalanche creator said that the present market downturn had managed to not affect the strength for the crypto enthusiasm for crypto exposure among institutional investors. Based on Sirer’s observation, the legitimacy of crypto asset class is “beyond question,” he said. “I have been getting contacts from retirement funds, but not hedge funds, but retirement funds. Very different piece, far more dollars under their control and they are slowly coming into crypto.” According to Joe DiPasquale, CEO of crypto hedge fund BitBull Capital, “Institutional investors are still interested and continue to build positions at key support levels.” 

“Naturally, the market hype has damaged but these downturns have been historically opportune moments for long-term entries,” the BitBull Capital CEO added. A spokesperson for Nickel Digital Asset Management, a $200 million crypto hedge fund gave some details into the up-and-coming strategies among institutional players during the present range-bound trading for cryptocurrencies. “We are seeing active and continuous engagement from the entire institutional community, including (but not limited to) pensions, foundations, endowments and funds of hedge funds,” said the Nickel digital representative. 

“Recent volatility has proved to be an opportunity for certain trading strategies (like market-neutral arbitrage) while being a headwind for others (beta exposures to underlying crypto assets). In fact, it created an immediate demand for lower-volatility defensive funds. The investment objective, sizing and risk tolerance are the critical factors in assessing any investment opportunity, especially in crypto.” Nickel digital rebalanced its cash position due to the decline in current market and this was named as an exercise in “financial discipline”. DiPasquale has been letting go off any concerns related to regulatory scrutiny having a negative impact on institutional crypto involvement, DiPasquale said. “Regulatory fears are always present in the crypto space, but there is a drive towards compliance, which is likely to result in a more lenient attitude in the future.” 

Sirer has previously foretold that sideways accumulation will be on top of the crypto price action during the summer months. Even though there has been a decrease by 50%, Bitcoin has been range-bound between the $32,000 and the $36,000 price marks. Bitcoin’s shortage of a particular breakout either way has almost meant repeating mini-dips and pumps across the crypto market. “I am really excited about what’s to come because I know there is so much interest in institutional, retail, as well as in this new technology that is poised to change the world. We are in the early days of a very big movement to restructure the entirety of the financial infrastructure.” 

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