Crypto could be a good investment. Crypto hedge funds saw returns of 16.33% in 2019 according to Eurekahedge, while traditional hedge funds took in 10.4%, according to HFR, as reported by the Financial Times.
Equally, crypto could also be a terrible investment. The Eurekahedge Crypto-Currency Hedge Fund Index, soared by 1,708.50% in 2017 during the height of the Bitcoin bubble, but lost 70.27% of its value in 2018.
But the crazy numbers have piqued the interest of institutional investors. “Bitcoin has a higher return on a one, three and 10-year basis than any other asset class,” Steve Kurz, head of asset management at crypto-fund Galaxy Digital, told the FT.
Galaxy Digital CEO Mike Novogratz speaking at Ethereal in 2019. Image: Decrypt
And Chris Zuehlke, global head of another crypto-fund, Cumberland, added that it is “only a matter of time before traditional banks get involved, perhaps as brokers between customers and liquidity providers like us.”
Both Cumberland and Galaxy Digital are borne from the minds of traditional investors. Galaxy Digital was founded by Mike Novogratz, formerly of Goldman Sachs, and Cumberland was founded by DRW, a traditional trading company.
There are now more ways for institutional investors to invest in Bitcoin and other cryptocurrencies. Intercontinental Exchange offers physically settled Bitcoin futures trading via its platform Bakkt, while CME has both futures and options trading available in its cash-settled Bitcoin futures.
At the same time, investors are curious about what the halvening may bring for Bitcoin’s price. The Bitcoin halvening is set for May this year, and will see the new supply of Bitcoin get cut in half. But so far, there is no clear consensus.