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Cryptocurrency Hedge Funds

Just Bitcoin-beta plays?

Nicolas Rabener
10 min read
31 Jan 2022

SUMMARY

  • Cryptocurrency hedge funds generated abnormally high and uncorrelated returns since 2014
  • However, the returns can be simply attributed to the performance of Bitcoin
  • Many crypto-beta ETFs & ETPs have been launched, so crypto hedge funds need to move from beta to alpha

INTRODUCTION

Cryptocurrencies have reached politics far quicker than other financial instruments given their use in criminal activities and the potential to destabilize central banks and fiat currencies. In contrast, ETFs have accumulated $10 trillion of assets with minimal interest from politicians.

However, the interest from Washington likely peaked in November 2021 when a group of cryptocurrency investors raised $40 million to buy a copy of the U.S. Constitution. They were outbid by Ken Griffin, the founder of Citadel, a large multi-strategy hedge fund and market maker Citadel Securities.

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