Investors are eager to invest in the next technological revolution.
According to the new index launched by Hedge Fund Research, investors have a huge interest in cryptocurrency hedge funds. There was “explosive growth” in crypto hedge fund interest by investors over the course of the last year.
See JP Morgan: Crypto Could Help Diversify Portfolios
Cryptocurrency and blockchain technology have become incredibly popular amongst individual and institutional investors across the globe. Many have been leaning more towards investing in hedge funds relating to the cryptocurrency industry instead of the individual cryptocurrencies.
Cryptocurrencies were the best-performing currency in 2015 and by far the best performing asset class of 2017. Business Insider, Forbes & CNBC covered some of the outlandish returns in some of the top cryptocurrency hedge funds last year.
There are Crypto Hedge Funds that did over 24,000% and 80,000% respectively in 2017.
No, That’s not a typo.
It’s important that you recognize that these investments are not for the faint of heart, as they can be much more volatile than stocks, but it’s growing and yes, they present a very real investment opportunity.
“There is 200 Trillion dollars tied up in stocks, bonds, gold & cash. I am not excited about putting my money into any of those 4 options right now. If 1% of that 200 Trillion finds it’s way into cryptocurrencies over the next 10 years you’d be looking at a 2 Trillion Valuation. 12X what it is today.”
It’s Much Bigger Than Just Bitcoin
You may even want to look at other cryptocurrencies. Bitcoin is not the only digital currency. In fact, there are exchanges that buy and sell each day many of these different cryptocurrencies, including ETH (Ethereum) or XRP (Ripple) which is from Ripple Labs and is being used in blockchain projects involving existing banks. Several other cryptocurrencies in the Top 20 by market cap have a utility value that many see doing very well with the widespread adoption of blockchain technology.
The Underlying Technolgy- The Blockchain
Blockchain technology itself, has numerous applications, from banking to the Internet of Things. In the next few years, BI Intelligence expects companies to flesh out their blockchain IoT solutions. Blockchain is a promising tool that will transform parts of the IoT and enable solutions that provide greater insight into assets, operations, and supply chains. It will also transform how health records and connected medical devices store and transmit data.
We are in the infancy of a technology that has greater potential for revolutionizing technology and making a bigger impact than the coming of the internet in the 90’s. There is a use case for almost every industry.
Blockchain is a distributed ledger technology that underlies cryptocurrencies like Bitcoin and platforms like Ethereum. It provides a way to record and transfer data that is transparent, safe, audiaible, and resistant to outages. The blockchain has the ability to make the organizations that use it transparent, democratic, decentralized, efficient, and secure. It’s a technology that holds a lot of promise for the future, and it is already disrupting many industries.
Alternatives To Traditional Portfolio Allocation?
Cryptocurrency and blockchain technology have become incredibly popular amongst individual and institutional investors across the globe.
Many have been leaning more towards investing in hedge funds relating to the cryptocurrency industry instead of the individual cryptocurrencies.
We believe that the time has come for investors and financial firms to classify investing in Bitcoin, cryptocurrencies and blockchain based technologies as alternative investments, and thus having a place in a properly allocated investment portfolio. Over the next few years, it’s clear there will be more and more opportunities to invest in them. As these investment opportunities open up, they need to be classified appropriately in order to be placed in investor portfolios using proper asset allocation models.
Most people will dismiss them, including probably your advisor. But we venture to say that with the progress (and profits) being made, over the next year or two, we won’t be the only person telling you about how they may fit the alternative investment sleeve of your portfolio.
Cryptocurrency Investment Vehicles
Only a handful of ETFs and other exchange traded products have significant exposure to Bitcoin or other cryptos. One is Grayscale’s Bitcoin Investment Trust ( GBTC ). It’s attracted $1.4 billion in assets and is up more than 680% this year.
Actively Managed Hedge Funds
One of the main reasons that these institutional investors have refused to put their money into the individual currencies lies in the fact that they are relatively unstable. This is where the idea of cryptocurrency hedge funds come in.
Actively managed hedge funds are able to give investors a broader and more secure way to invest in cryptocurrency, without being subject to as high degree of risk. Obviously assuming that you are dealing with a reputable group and a manager with experience.
There are a ton of cryptocurrency hedge funds run by newcomers with little to no experience managing assets. Choosing to work with a reputable firm is extremely important.
Security & Regulation
The biggest challenges hedge funds are facing relate to security and regulation. With security/custodian solutions still being developed by third party companies, and some large banks not yet providing custodial services.
As to regulation, the top cryptocurrency hedge funds usually partner with top law firms and regulatory experts to ensure that they stay abreast of new regulation and have an eye on the horizon for future decisions by the SEC and other regulatory bodies.
The market is evolving, and money that’s been made in blockchain and crypto is being invested back into the sector, leading to increased competition and the creation of new coins and service providers, one hedge fund expert said.
Those who can identify the future leaders can make a lot of money.
Cryptocurrencies could go on a bull run greater than last year and pass the trillion-dollar mark in terms of value, experts told CNBC
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Accuracy of Information
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The price of Bitcoin and other cryptocurrencies are highly volatile. It is common for prices to increase or decrease by over 20–100% in some coins in a single day. Although this could mean potential huge profits, this also could mean potential huge losses. DO NOT INVEST ALL YOUR MONEY IN CRYPTOCURRENCIES. Only invest money which you are willing to lose.
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