Following a challenging period in 2022, crypto hedge funds experienced a notable resurgence this year due to the surge in Bitcoin prices.
Cryptocurrency hedge funds have generated an average return of 44% this year through December 20, marking a rebound from a 52% loss in 2022, ranking as the best among 29 strategies monitored.
They have weathered a challenging 2022 and are experiencing a recovery, and many are anticipating a prosperous 2024.
Crypto Hedge Funds Recover
Pantera Capital, led by industry veteran Dan Morehead, experienced a significant rebound, with its liquid-token fund surging nearly 80% by mid-December. This comes after an 80% slump in 2022. Similarly, Chainview Capital, overseen by 31-year-old Dan Slavin, doubled its performance following an 18% decline in the previous year.
Stoka Global LP, specializing in altcoins, also achieved an impressive gain of 268% by November 30, according to founder Naveen Choudary, a former tech investment banker at Goldman Sachs Group Inc.
While the average performance of cryptocurrency hedge funds didn’t match Bitcoin’s over 150% rally this year, the positive reversal is considered uplifting news for an industry still recovering from challenges, including the collapse of FTX in the previous year. The fallout from FTX, redemptions, and banking challenges resulted in the demise of approximately one-third of all crypto hedge funds.
However, despite this resurgence, the average performance still lags behind Bitcoin’s impressive gain in 2023 by approximately 120 percentage points. Moreover, the index falls short when compared to passive crypto funds, which, on average, recorded returns of around 265% in the past year.
Crypto Hedge Fund Managers Optimistic About 2024
Greg Moritz, the co-founder and COO of Alt-Tab Capital, anticipates a positive trajectory for the crypto market. He foresees a boost driven by a convergence of macroeconomic and industry-specific factors, including the stabilization of inflation, the Federal Reserve’s shift away from rate hikes, and the upcoming Bitcoin halving, expected to reduce the cryptocurrency’s supply.
Dan Slavin, the founder of Chainview Capital, expressed optimism about a potential resurgence of token mania in the crypto market, drawing parallels to the mood experienced three years ago when Bitcoin surged to record highs. As the leading token continues its upward trajectory, prospective investors increasingly engage with fund managers, and hedging strategies remain cost-effective.
Describing the year as a “dream,” Slavin plans to expand his team, transforming the existing “two-man show.” Pantera Capital’s liquid-token fund, led by Cosmo Jiang, positions itself for a bullish ride in 2024, particularly with altcoins. Historically, altcoins have outperformed during the latter stages of a market rally following Bitcoin’s ascent.