Throughout 2018, the cryptocurrency market has lost 75 percent
of its valuation. Yet, crypto hedge funds are raising hundreds of millions of
dollars from accredited investors and institutions.
On November 1, CCN reported
that Grayscale Investments, a subsidiary company of cryptocurrency venture
capital behemoth Digital Currency Group, raised more than $330 million from
both existing and new investors.
After recording a
1,200 percent increase in the amount the firm had raised across three quarters
in 2017, Michael Sonnenshein, managing director of Grayscale Investment stated
that the substantial 69 percent drop in the price of Bitcoin had minimal impact
on the company’s client base.
“Bitcoin prices doing
nothing but go down the entire year has not deterred our existing clients from
putting more capital to work. Asset inflows are really strong despite these
price declines. Investors are taking the pullback as an opportunity to increase
their exposure. The price has not slowed down the pace of investments — it’s
actually caused us to broaden our relationships.”
Not Just Grayscale
As a publicly tradable
instrument provider of Bitcoin, Ethereum, Ethereum Classic, and Zcash that
allow investors in the stock market to invest in the cryptocurrency market,
Grayscale has a strong reputation as a digital asset asset manager and
investment firm.
But, over the last
several months, other major cryptocurrency hedge funds such as Pantera Capital
and former Point72 portfolio manager Travis Kling-founded Ikigai Asset
Management have raised over $100 million to invest in the asset class.
The cryptocurrency
sector has fallen by a significant margin within a 11-month period, but to many
investors exploring the asset class as a long-term investment opportunity, the
correction of the market has been considered an opportunity.
Throughout the past 10
years, the cryptocurrency market recorded four major corrections, all of which
demonstrated drops of over 80 percent in valuation. Hence, as Travis Kling
emphasized, the cryptocurrency market is merely at the start of exponential
growth and the correction is a viable opportunity for new investors to enter.
“Same as that earlier
invention, I believe crypto will create trillions of dollars along the way.
Already the market for virtual coins is valued at hundreds of billions of
dollars. And it’s all just getting started. So I left Point72, billionaire
Steven A. Cohen’s hedge fund, in December to continue my investing career, but
in a new asset class,” Kling wrote on
August 1.
In August, Pantera
Capital raised
more than $100 million and is targeting to raise $75 million more to
establish a venture capital-style fund to invest in cryptocurrency startups.
Over 140 investors
participated in the $100 million fund of Pantera with a 10-year long-term
vision to invest in the cryptocurrency industry and emerging startups rather
than cryptocurrenies like Bitcoin and Ethereum.
Market Growth is Strong
Historically, the
cryptocurrency market has rebounded strongly from large corrections and
consistently achieved new all-time highs.
2018 has evidently
shown that cryptocurrency as an asset class is strong and robust, supported by
a rapidly growing industry. It is not a fad but rather a newly emerging
technology, consensus currency, and computing system that is competing against
existing centralized systems.
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