A group of cryptocurrency-focused hedge funds have made unexpected gains in recent weeks, as Donald Trump's election victory sparked a strong rally that pushed Bitcoin above the $100,000 level.
Funds using cryptocurrency strategies posted gains of 46 percent in November, bringing their year-to-date returns to 76 percent, according to data provider Hedge Fund Research. HFR said returns outpaced the broader industry, with the average hedge fund rising 10 per cent in the first 11 months of this year.
Brevan Howard Asset Management and Galaxy Digital, the cryptocurrency investment manager founded by billionaire Mike Novogratz, have been among the biggest winners from the recent boom in digital assets.
The huge gains for cryptocurrency funds come after Trump's election victory in November added a new boost of enthusiasm to this year's rally in Bitcoin, the largest cryptocurrency, which has also sent smaller tokens soaring.
Bitcoin has risen 130 percent this year to about $100,000, helping push the market value of major cryptocurrency tokens by $1.8 trillion to $3.5 trillion, according to FT Wiltshire digital assets dashboard. The cryptocurrency market retreated from recent highs this week after the Federal Reserve said it would cut interest rates less than expected next year, weighing on risk assets.
Investors are betting that Trump's cryptocurrency-friendly nominees for top government positions will contrast with Joe Biden's administration, which has generally taken a more skeptical approach.
“Trump’s election is great news for digital assets because it will bring more clarity on the regulatory side,” said Damian Miller, managing partner at macro hedge fund MP Alpha Capital. “There will be a more friendly and cooperative environment towards Bitcoin and blockchain.”
Brevan Howard's flagship cryptocurrency fund rose 33 percent in November, and is now up 51 percent in the first 11 months of the year, according to investors. Brevan Howard, with $35 billion in assets, is one of the largest hedge fund managers with a dedicated cryptocurrency business, which he launched in 2021.
Galaxy's hedge fund strategy rose 43 percent in November and will rise 90 percent in 2024, according to investors. The New York-based group has doubled its assets under management in the past two years, to $4.8 billion, partly due to… Buy up Assets from bankrupt crypto companies.
Galaxy and Brevan Howard declined to comment on their performance.
The recent surge in digital assets represents a stunning reversal in the fortunes of a sector mired in a deep crisis starting in 2022.
Bitcoin hit a low of about $15,500 when Sam Bankman-Fried's FTX exchange collapsed in November 2022. Galaxy, which sought to position itself as a full-service crypto financial services company, posted a net loss of $1 billion that year.
Cryptocurrency industry He got a filling In January 2024 when the US Securities and Exchange Commission approved 11 Bitcoin exchange-traded funds, opening the door to cryptocurrencies for new institutional and retail investors. BlackRock, the world's largest asset manager, said last week that it sees “a reason to include bitcoin in multi-asset portfolios.”
NextGen Digital Venture, a $120 million cryptocurrency equity fund, is up 330 percent from its launch in March 2023 through the end of November, according to investors. It leveraged its positions in some bitcoin ETFs, as well as cryptocurrency exchange Coinbase and software provider-turned-bitcoin investor MicroStrategy.
“After the Bitcoin ETF was approved, we felt that cryptocurrency stocks would become another opportunity for institutional investors because they already have access to Bitcoin,” said Jason Huang, co-founder of NextGen Digital Venture.
Coinbase's value is up nearly 60 percent since the end of 2023, while MicroStrategy is up more than 400 percent.
Some macro hedge funds — which trade macroeconomic trends in currencies, commodities, bonds and stocks — have also increased exposure to digital assets in anticipation of a favorable market environment. MB Alpha Capital's $20 million global macro hedge fund is up more than 30 percent this year, according to investors.
“We've done well in digital assets: Bitcoin, Ethereum and Bitcoin miners,” Miller said, referring to companies that complete complex calculations in exchange for tokens.. “Over the past 18 months, our entire thesis has been around institutional adoption of digital assets and the overall backdrop of looser monetary policy, a weaker dollar, and a liquidity-rich environment.”
Trump has indicated that regulating cryptocurrencies is among his most pressing priorities, and has appointed David Sachs, a venture capitalist and close associate of Elon Musk, as his White House representative. Cryptocurrency czar.
The change in leadership at the Securities and Exchange Commission (SEC), the top securities regulatory body in the United States, has also been welcomed by crypto enthusiasts.
Gary Gensler, the current president who has described cryptocurrencies as a “Wild West” full of legal violations and investor risks, will step down when Trump takes office. He has declined to craft rules catering to digital assets, arguing that many tokens are securities and that current securities law represents sufficient guidance.
Gensler will be replaced by a crypto advocate Paul Atkins.
However, several managers warned that the rise in Bitcoin should prompt investors to pause and take stock. NextGen Digital Venture's Huang said that while he is long-term bullish on bitcoin and cryptocurrencies, “no assets rise in a straight line without volatility.”
