A clutch of cryptocurrency-focused hedge funds has made a windfall in current weeks as Donald Trump’s election win fuelled a robust rally that propelled bitcoin above the $100,000 milestone.
Funds using crypto methods posted positive factors of 46 per cent in November, bringing their year-to-date returns to 76 per cent, in line with information supplier Hedge Fund Analysis. The returns have outpaced the broader business, with the typical hedge fund gaining 10 per cent within the first 11 months of this yr, HFR stated.
Brevan Howard Asset Administration and Galaxy Digital, the cryptocurrency funding supervisor based by billionaire Mike Novogratz, have been among the many greatest winners from the current surge in digital belongings.
Crypto funds’ outsized positive factors come after Trump’s election victory in November added a recent jolt of enthusiasm to this yr’s rally in bitcoin, the most important cryptocurrency, which has additionally despatched smaller tokens hovering.
Bitcoin has risen 130 per cent this yr to round $100,000, serving to push the market worth of main crypto tokens up by $1.8tn to $3.5tn, in line with the FT Wiltshire Digital Assets Dashboard. The crypto market pulled again from current highs this week after the Federal Reserve stated it will reduce charges lower than anticipated subsequent yr, hitting dangerous belongings.
Buyers are betting that Trump’s crypto-friendly nominees for high authorities jobs will distinction with Joe Biden’s administration, which has usually taken a extra sceptical method.
“Trump’s election is nice information for digital belongings as a result of it’s going to convey extra readability on the regulatory facet,” stated Damien Miller, managing associate at macro hedge fund MP Alpha Capital. “There might be an surroundings that’s extra pleasant and collaborative in direction of bitcoin and blockchain.”
Brevan Howard’s essential crypto fund gained 33 per cent in November, and is now up 51 per cent within the first 11 months of the yr, in line with traders. Brevan Howard, which has $35bn in belongings, is likely one of the greatest hedge fund managers to have a faithful crypto enterprise, which it launched in 2021.
Galaxy’s hedge fund technique gained 43 per cent in November, and is up 90 per cent in 2024, in line with traders. The New York-based group has greater than doubled its belongings underneath administration previously two years, to $4.8bn, partly by buying up belongings from bankrupt crypto corporations.
Galaxy and Brevan Howard declined to touch upon their efficiency.
The current surge in digital belongings marks a staggering reversal in fortunes for a sector that was mired in a deep disaster starting in 2022.
Bitcoin hit a low of round $15,500 when Sam Bankman-Fried’s FTX alternate collapsed in November 2022. Galaxy, which has sought to place itself as a full-service crypto monetary providers agency, posted a $1bn web loss that yr.
The cryptocurrency business received a fillip in January 2024 when the US Securities and Change Fee permitted 11 alternate traded bitcoin funds, opening the door to cryptocurrencies for brand new institutional and retail traders. BlackRock, the world’s greatest asset supervisor, stated final week it sees a “case for together with bitcoin in multi-asset portfolios”.
NextGen Digital Enterprise, a $120mn crypto fairness fund, is up 330 per cent from its launch in March 2023 to the tip of November, in line with traders. It has benefited from positions in some bitcoin ETFs, in addition to cryptocurrency alternate platform Coinbase and software program supplier turned bitcoin investor MicroStrategy.
“After the bitcoin ETF was permitted we felt that crypto shares would change into one other alternative for institutional traders as a result of they already had entry to bitcoin,” stated Jason Huang, founding associate of NextGen Digital Enterprise.
Coinbase is up virtually 60 per cent for the reason that finish of 2023, whereas MicroStrategy is up greater than 400 per cent.
Some macro hedge funds — which commerce macroeconomic traits in currencies, commodities, bonds and shares — have additionally boosted publicity to digital belongings in anticipation of a beneficial market surroundings. MP Alpha Capital’s $20mn international macro hedge fund is up over 30 per cent this yr, in line with traders.
“We’ve had run on digital belongings: bitcoin, ethereum and bitcoin miners,” stated Miller, referring to corporations that full complicated calculations in alternate for tokens. “Over the previous 18 months, our complete thesis was across the institutional adoption of digital belongings and the macro backdrop of looser financial coverage, a weaker greenback and a liquidity-rich surroundings.”
Trump has signalled that crypto regulation is amongst his most urgent priorities, and has named enterprise capitalist and Elon Musk confidant David Sacks because the White Home’s cryptocurrency tsar.
A change in management on the SEC, the highest American securities regulator, has additionally been welcomed by crypto lovers.
Gary Gensler, the present chair who branded crypto a “wild west” rife with unlawfulness and investor danger, will step down when Trump takes workplace. He had refused to craft guidelines catered to digital belongings, arguing that many tokens are securities and that present securities regulation is sufficient steerage.
Gensler might be changed by cryptocurrency advocate Paul Atkins.
Nonetheless, a number of managers warned that the surge in bitcoin ought to trigger traders to pause and take inventory. Huang at NextGen Digital Enterprise stated that, whereas he’s long-term bullish on bitcoin and crypto, “no asset rises in a straight line with out volatility.”
