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Hedge Funds Investing Billions In Crypto (#GotBitcoin)

Billionaire investor Steven Cohen, once dubbed the “Hedge Fund King,” has reportedly entered the crypto space. Hedge Funds Investing Billions In Crypto (#GotBitcoin)

According to a Fortune article published July 12, Cohen has invested in cryptocurrency-focused hedge fund Autonomous Partners through his VC firm Cohen Private Ventures.

Autonomous Partners was founded last December by Arianna Simpson, a venture capitalist with a history in the bitcoin space, including a time at bitcoin wallet startup BitGo. Her crypto fund has already secured investments from big names including Coinbase CEO Brian Armstrong, Union Square Ventures and Craft Ventures.

While the size of the new investment was not revealed, it’s not the first time Cohen Private Ventures has invested in Simpson’s projects. In 2015, her venture fund, Crystal Towers Capital, also received an investment from the firm.

Simpson told Fortune that Autonomous Partners is currently concentrated on smaller, “next generation” cryptocurrencies, though it invests to some extent in major cryptos like bitcoin and ether.



Updated: 7-23-2020

Arca’s Flagship Crypto Hedge Fund Is Up 77% in 2020

Arca Capital Management’s flagship hedge fund – the Arca Digital Assets Fund – is up 76.74% in 2020, even as some cryptocurrency-focused hedge funds appear to be floundering and still others are folding due to lackluster demand.

* According to a monthly investor note obtained by CoinDesk, Arca Digital Assets Fund, which invests in crypto companies’ tokens, equities and bonds, has grown 9% or more every month this year except for in February (-3.24%) and March (-4.36%) when it followed global capital markets’s virus-induced plunge.

* The fund’s 76.74% year-to-date gains beat the S&P 500 (+1.12%), Bloomberg’s crypto index BCGI (+38.01%) and bitcoin (+30.39%). January’s 35.37% growth was the fund’s strongest single month of 2020. Last month it gained 9.9%, the investor note shows.

* Arca’s Investment Adviser registration documents reveal that Arca Digital Assets Fund had a gross asset value of $2,976,028 as of March 30. A source familiar with the matter told CoinDesk that Arca has doubled its assets under management every quarter of 2020.

Updated: 9-23-2020

Crypto Hedge Fund Looks For $50M To Buy DeFi Tokens Amid Market Pullback

The cryptocurrency money manager Panxora seeks to raise up to $50 million for a new hedge fund to buy digital tokens associated with the fast-growing decentralized finance (DeFi) sector.

DeFi is a segment of the blockchain industry consisting of automated lending and trading platforms that aim eventually to displace banks and Wall Street firms. But in a sign of just how fast-moving and fickle digital-asset markets can be, the new fundraising effort is getting underway just as prices are tumbling for some of the leading DeFi projects, including Yearn.Finance and Aave.

“This has got the potential to really change the way finance is carried out,” Panxora CEO Gavin Smith said in an interview.

DeFi projects, often referred to as protocols and mostly built atop the Ethereum blockchain, have soared in popularity this year.

It has been fueled by the “yield farming” craze that encourages crypto traders to sock digital assets into the trading and lending systems in pursuit of high interest rates, token rewards and fast gains. Dollar-linked tokens known as stablecoins can fetch annualized rates up to 20% through Yearn.Finance, versus 0.01% for a savings account with JPMorgan Chase, the largest U.S. bank.

Collateral locked into DeFi projects surged to $13 billion earlier this month, according to DeFi Pulse, a 20-fold increase since the start of the year. Big cryptocurrency exchanges like Binance and Coinbase have rushed to cash in on the trend, listing DeFi tokens while acknowledging that a growing share of market volumes might eventually migrate to decentralized trading platforms.

But just in the past week, the trend has reversed; total collateral in the systems has declined to about $9.5 billion. And as prices tumbled for bitcoin (BTC), the largest cryptocurrency, and ether (ETH), the native token of the Ethereum blockchain, DeFi-affiliated tokens fell even harder.

Aave, a decentralized lender, saw its LEND tokens fall by 12% during the seven days through Tuesday, according to Messari, a cryptocurrency data firm. OMG’s OMG tokens have plummeted 54%, while Yearn.Finance’s YFI tokens are down 29%.

It’s been “an absolute bloodbath,” Messari analysts wrote Tuesday in their daily newsletter. “DeFi’s casino summer could be coming to an end.”

Cryptocurrency analysts say DeFi systems are likely to grow over the long term, though short-term risks are high in the nascent market, and many of the digital tokens are so new that they can be difficult or even impossible to value using anything resembling traditional financial analysis.

Chainlink, a so-called blockchain “oracle” that supplies price feeds to decentralized protocols, is the top-performing digital asset this year among those with a market value of at least $1 billion, climbing more than fourfold in 2020. And that’s after a 45% decline just this month.

“We expect the market to be volatile in the early years,” Smith said. “While there is great potential there will inevitably be setbacks along the way.”

Panxora’s new hedge fund, based in the Cayman Islands and scheduled to start trading on Nov. 2, will primarily buy tokens listed on big centralized cryptocurrency exchanges rather than from the roster of decentralized, automated exchanges like assembled by DeFi developers.

Smith, a former metals-pricing analyst for the Singaporean commodities-trading firm Trafigura, says that’s primarily because few if any decentralized exchanges can guarantee sufficient compliance with anti-money-laundering rules, and also because a token listing from an exchange theoretically implies some level of vetting.

“We have to offer it as a conventional hedge fund that invests in these protocols,” Smith said.

Updated: 1-17-2021

Hedge Fund Predicts $115K Bitcoin Price And The Fall Of ‘Speculative’ Altcoins

Analysts say Bitcoin and Ether’s growing dominance of the crypto market are signals that the current bull market is drastically different than the last one.

New data from Pantera Capital, an investment firm and hedge fund, suggests that Bitcoin’s (BTC) current price action is closely following the stock-to-follow model’s trajectory and the firm’s analysts believe BTC will reach $115,212 by Aug. 1.

Bitcoin’s parabolic rally may have placed the price a bit ahead of the model’s projection and this week’s 28% correction sent temporary shivers across the market but sharp corrections and short consolidation periods are characteristic of bull markets.

The model focuses on the price impact of Bitcoin halving events that cut the amount of Bitcoin minted every block in half every 4 years.

According to the model, the impact of decreasing Bitcoin’s supply becomes present roughly 6 months after each halving. When Bitcoin price halved on May 11, 2020 the price was around $8,000 and 6 months later BTC was trading above $15,000 and on the verge of entering a parabolic rally to a new all-time high.

The chart above shows the progress of Bitcoin’s price in the days after each halving. A similar pattern developed over the past two halvings, just with a differing time span. The current BTC performance appears to be in between the 2012 market 2016 cycles, which has the potential to lead to a price of Bitcoin between $300,000 and $400,000 around 450 days after the last halving, or roughly Aug. 4.

Signs Of A Maturing Market

Another significant difference between this rally and 2017 has to do with the overall market composition and where value is located. A majority of the value of the current market is consolidated in Bitcoin and Ether (ETH) as institutional investors have thus far chosen the most established chains to gain exposure to the cryptocurrency sector.

Andy Yee, a Public Policy Director for Visa in Greater China, pointed to this development in a Tweet response to Pantera’s report:

“This rally is different. Massive shift from high-speculative, non-functioning tokens in 2017 to #Bitcoin and #Ethereum today, according to PanteraCapital.”

As shown in the chart above, Bitcoin and Ether have 86% of the value. The other 5,000 chains have 14%. While BTC was peaking late in 2017, the two top coins had a total of 52% of the value, indicating that BTC and ETH have consolidated their market share over the past three years.

Possible reasons for this shift in funds include institutional money focusing on Bitcoin as an entry point into the cryptocurrency market due to its network security and vast mining infrastructure, and the burgeoning decentralized finance ecosystem which is predominantly built on the Ethereum network.

As the DeFi ecosystem continues to grow it will also attract institutional attention, further boosting the price of Ether as it is required to interact with all smart contracts and DeFi platforms on the Ethereum network.

Data from defipulse shows that the total value locked in DeFi now stands at $29.98 billion, near its all-time high of $23.116 billion.

As the TVL increases, so does the value of the top ecosystem coins including AAVE and Synthetix (SNX). Trading volume on the top decentralized exchanges, such as Uniswap and SushiSwap, continues to grow with data from Dune Analytics showing that the combined weekly DEX volume recently surpassed $13 billion.

Institutional Inflow To Bitcoin May Trigger A New Altcoin Season

While Bitcoin and Ether currently hold 86% of the cryptocurrency market value, past market cycles would indicate the possible flow of funds out of the top cryptocurrencies and into promising new projects. This dynamic has led analysts like Raoul Pal to suggest that after Bitcoin and Ether’s stellar rally, the “next stop will be higher risk alts.”

Media have also reported that Goldman Sachs is rumored to be preparing to offer custody services for cryptocurrencies could set the stage for the next hype cycle for Bitcoin. A sustained inflow of money from the institutional class could be the catalyst that lifts the price of Bitcoin and keeps it in line with the projections of the stock-to-flow model.

Updated: 1-19-2021

Bitcoin Breakout ‘Imminent’ Says Hedge Fund As Analyst Targets $48K Monthly Close

Both Bitcoin’s technicals and analysis of on-chain indicators are “wildly bullish,” says Vailshire Capital Management, with BTC/USD reaching three-day highs.

A fresh Bitcoin (BTC) breakout is “imminent” and most likely to the upside, hedge fund Vailshire Capital Management says.

In a tweet on Jan. 19, Jeff Ross, the firm’s founder and CEO, described the outlook for BTC performance as “wildly bullish.”
Vailshire Capital ‘steadfastly long’ BTC

Using a combination of on-chain metrics and macro insight, Ross highlighted an upcoming end to the ranging and conolidation seen in the Bitcoin price this week.

“Update on #Bitcoin technicals… Breakout imminent. Direction still undecided. Macroview: Wildly bullish. On-chain analysis: Wildly bullish,” he wrote.

“Upside move most likely. Short-term dips will be bought with strength. Vailshire Partners LP remains steadfastly long.”

His comments come as Bitcoin sentiment appears to return to “business as usual” after the holiday break, with asset management giant Grayscale making its biggest one-day BTC buy ever — around $700 million as of Tuesday.

As Cointelegraph reported, both network difficulty and hash rate have hit new all-time highs, and expectations are mounting that price will rise to follow suit. Ether (ETH), the largest cryptocurrency other than Bitcoin, beat its record highs from 2018 on the day.

PlanB: All Eyes On Monthly Close

Vailshire meanwhile is not alone in its optimism over Bitcoin’s prospects this week. In the latest update to his stock-to-flow Bitcoin price model, quant analyst PlanB eyed the possibility of BTC/USD soon passing the “point of no return.”

This, he explains, would occur should January’s monthly close be substantially higher than the current spot rate — around $48,000, for example.

In so doing, Bitcoin would cement its status within stock-to-flow’s theories, including its transition to an asset with a market cap of up to $29 trillion, as dictated by PlanB’s stock-to-flow cross-asset model (S2FX).

“A larger monthly jump to #bitcoin $48K would create a nice gap between monthly dots. These gaps usually mark the point of no return (red arrows), i.c. the phase transition to #phase5,” he commented while uploading the chart to Twitter.

Not everyone was convinced. In an update on Tuesday, Cointelegraph Markets analyst filbfilb warned that the next few days would be critical if Bitcoin is to avoid bearish pressure.

The reason, he said, came from repeated warning signals delivered by his Predator trading tool.

“Predator printed its second yellow candle in the Bitcoin run-up,” he explained.

“Last one it could be ignored as the following candle was green. Three days to resolve it or it may mean a more lengthy chopsolidation/retrace IMO.”

Updated: 1-25-2021

Crypto Hedge Funds Underperformed (Average ROI 166%) Bitcoin (300%) During Rally Last Year

Actively managed cryptocurrency hedge-funds underperformed Bitcoin during the largest digital asset’s bull run last year, according to Crypto Fund Research.

The funds’ average rate of return was 166%, compared with a more than 300% increase in Bitcoin. During 2017’s surge, gains were about 1,100% as the dominant token burst into the mainstream consciousness with a 1,375% increase, according to the researcher. The data tracker didn’t release the names of the top performing funds.

While the funds as a whole significantly underperformed, a few breakout managers that made long bets and invested in decentralized-finance projects exceeded the average. At least one fund posted a more than 700% gain, according to Crypto Fund Research’s preliminary data. At least 10 funds registered more than 300% growth.

“The top-performing funds were funds that were long only,” said Josh Gnaizda, founder of Crypto Fund Research. “Some of them might even have levered exposure. It may also be that they have exposure to cryptos besides Bitcoin that have done well as well. Some of the DeFi products have done very well that year.”

DeFi stands for decentralized-finance applications, whose use exploded last year to allow for lending, trading and other functions without the use of intermediaries like banks. Many of them issued their own tokens, which appreciated significantly.

Crypto Fund Research said it can’t share individual funds’ rates of returns for the full year because of regulatory reasons. At the end of 2020, there were about 820 crypto funds, down slightly from the year before, the firm said.

Updated: 4-11-2021

Daniel Loeb’s $17B Hedge Fund Is Keeping Crypto With Coinbase – And Maybe Even Staking It

Third Point is the latest institutional stalwart to be revealed as a client of Coinbase Custody.

Billionaire investor Daniel Loeb’s “deep dive into crypto” last month led his $17.6 billion hedge fund to a familiar place: a custody deal with Coinbase.

Loeb’s Third Point LLC now holds cryptocurrency from five of its funds with Coinbase, according to regulatory documents obtained by CoinDesk. Some tout billions of dollars in underlying assets, but it is not clear how much of that is in crypto, which assets, or for how long they’ve invested.

With less than a week to go before Coinbase’s Nasdaq debut, the custody tie-up underscores how Brian Armstrong’s nine-year-old firm has transformed itself from a bitcoin-only digital wallet into a massive vault for Wall Street’s crypto bets.Coinbase revealed it held $122 billion in institutional assets during this week’s voluntary earnings call. It expects “meaningful growth” driven in part by custody revenue in the year ahead.

CoinDesk reported earlier this week that fellow hedge fund titan Paul Tudor Jones is also a Coinbase client, offering a glimpse at the deep-pocketed investors behind the exchange’s institutional assets under management.

Third Point did not respond to CoinDesk by press time.‘Deep dive’

The hedge fund’s true exposure to crypto assets remains more opaque. In a brochure accompanying the March 31 filings, Third Point said it can invest directly in cryptos or indirectly through derivatives contracts.

Notably, it is open to staking and lending any cryptos as well, the documents say.

“This is the first big traditional hedge fund that I know of that is doing staking,” said Tim Ogilvie, who runs a company called Staked that provides staking services to institutional investors, after reviewing the documents.

“On the one hand I’m surprised. On the other hand I’m not surprised,” he added. “If you want to hold a crypto asset that is proof-of-stake I think you have a fiduciary responsibility to stake.”

Proof-of-stake blockchains like Tezos, Cosmos, Solana and others reward token holders with payouts akin to interest for securing the network with their contributed holdings.

Institutional investors are slowly waking up to staking, Ogilvie said. With staking there are two gains generators: the token price and the staking payout. It’s a guaranteed reward on top of a speculative bet. Ogilvie said there are $4.5 billion in crypto assets on Staked.

Third Point Invests

Loeb has never publicly disclosed his crypto holdings. But he began to toy – at least publicly – with the asset class in an early-March tweet.

Third Point’s own foray into crypto likely started well before. In mid-March the asset manager revealed it is backing crypto exchange eToro, which, like Coinbase, is gearing up for a Nasdaq debut.

Updated: 4-15-2021

Chinese Hedge Fund Jumps 258% After Ditching Ray Dalio’s Playbook

Shanghai hedge fund manager Li Bei says she learned quickly that the low-volatility approach to investing behind the rise of Bridgewater Associates was doomed in China for a startup like hers.

Steady returns did little to draw investors used to short-term rewards, so she put in her own money, cranked up leverage and produced an industry-leading 258% gain last year.

Li is a pioneer in macro hedge fund management in China, where homegrown firms are taking on foreign giants that are struggling to adapt in an industry where even low-fee mutual funds generate sizable returns. While her Shanghai Banxia Investment Management Center only manages about 500 million yuan ($76 million), she says firms like hers are best placed to assess how China is driving the global economy.

“We truly feel that Chinese funds have an obvious advantage judging corporate profits and commodity prices,” Li, 37, said in a phone interview from Shanghai. “For us, these are good times to make money.”

Chinese macro hedge funds made an average 41% return in 2020, four times the global level, according to data from Shenzhen PaiPaiWang Investment & Management Co. and Eurekahedge. The more than triple gain of Li’s Banxia Stable Fund put her firm at the top of rankings for such funds in China.

The stellar year promises to save Li from wounds inflicted by an exodus of investors in 2019 when her 9% return — still beating an 8.9% global average of peers, according to Eurekahedge — was dwarfed by local mutual funds during a bull market. The setback forced her to rethink her initial strategy of emulating Ray Dalio’s Bridgewater, an approach that she says included diversifying to limit volatility and providing free research to attract institutional clients.

‘Doesn’t Work’

“The Bridgewater route doesn’t work in China,” Li said. Offering two complimentary research reports a month didn’t help bring new money, and big institutions also balked at her fund’s small size.

When clients were pulling cash from Banxia Stable, Li put in some of her own, and added leverage of between 250% and 300%.

The product, managing less than 200 million yuan, replicates asset allocations in her larger Banxia Macro Fund but increases exposure through margin-financed trades in instruments such as stock index and commodities futures.

Last year’s success didn’t come easily for Li. After managing money at Bocom Schroder Fund Management early in her career, she won multiple industry awards for her 25% annualized returns running China’s first macro hedge fund at Honghu Investment Management Co. Yet losses in 2016 caused differences with her then-husband Liang Wentao, the firm’s founder.

After they parted ways, the mother of two set up Banxia at the end of 2017 and started building client relations from scratch.

“She is a very unique China macro manager with the ability to do focused and very deep macro research in specific areas, such as steel,” said William Ma, who was until recently chief investment officer of wealth manager Noah Holdings, which invested in Banxia in January 2018.

The level of leverage in the revamped Banxia Stable is closer to what legendary investor George Soros outlined in his autobiography, Li said. If the shift sounds bold and simple, making the right moves during last year’s turbulence to achieve a 63% gain in the underlying strategy required sharp judgment.

In January 2020, Li was among the earliest to turn short on stocks and commodities, taking note of not only emerging reports on the new coronavirus but also signs of a weakening economy. “Super-cheap” put options allowed her to add leverage that helped bring a 61% jump in the leveraged Banxia Stable in the first quarter as markets tumbled, she said.

Among Best

Li’s use of options to construct contrarian macro trades means “her return profile is negatively correlated” to global and local peers, said Ma, who has followed her performance since she worked at Honghu. “She is really one of the best macro hedge fund managers I have ever met,” he said.

Along with almost 9,000 local players, Li is competing with more than 30 global firms that are making inroads into China’s 4.5 trillion yuan hedge fund market. Dalio has said he saw the need to invest “a significant portion” of his portfolio in Chinese assets, and Bridgewater raised 900 million yuan in its second China private fund in September, doubling assets.

Bridgewater’s All Weather China strategy has posted annualized returns of 22% through July since its 2018 inception. That’s less than Banxia Stable’s 85% in the same period, Li said, while noting the strategies aren’t directly comparable.

In a reminder of risks macro hedge funds face when they bet in the wrong direction, Bridgewater’s flagship Pure Alpha II fell 12.6% last year.

More than other strategies, the performance of macro funds “depends a lot on the manager’s own judgment,” said Li Minghong, head of fund-of-funds investments at Panyao Capital in Shanghai.

Rocky Quarter

Banxia Stable fell 13% in the first three months of this year, in part because of an increase in steel prices. Its short positions in ferrous metals were hurt by China’s unexpected move to lower crude steel output and cut capacity, according to its quarterly investor letter. The fund broke even on bonds, and made a small profit on stocks even as the Shanghai Shenzhen CSI 300 Index declined 3%.

Banxia wasn’t alone. More than 40% of Chinese hedge funds made a loss in the first quarter, although macro funds managed an average 1% gain, according to PaiPaiWang.

Li and her peers face a challenge attracting investors in a nation where macro funds account for just 2% of the 65,129 local private securities funds tracked by PaiPaiWang. She said she’s now meeting more potential customers following last year’s performance, but fund raising remains tough, in part because of Banxia’s short track record.

She hasn’t felt any impact from the collapse of U.S. family office Archegos Capital Management, saying her leverage is much lower and portfolio more diversified.

The difficulties aren’t shaking her confidence in outperforming the likes of Bridgewater.

“They should just hire people like me,” she said. “But I won’t work for them.”


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