During a stellar year for cryptocurrencies, hedge funds specialising in digital assets also posted strong performances – but many still fell short of matching the returns of the industry’s flagship token, bitcoin, according to a report by Bloomberg.
In 2024, several crypto hedge funds delivered double-digit gains, with the VisionTrack Composite Index – tracking 130 crypto-focused hedge funds – rising 40%, according to data from Galaxy’s VisionTrack. However, these gains paled compared to bitcoin’s remarkable 120% surge, which pushed its value past $100,000 for the first time.
Hedge funds often rely on proprietary or innovative strategies that may not prioritise investing in bitcoin, leaving those that avoided the leading cryptocurrency unable to capitalise on its extraordinary returns.
Meanwhile, many investors seeking exposure to crypto markets turned to low-cost, easily tradable bitcoin exchange-traded funds (ETFs), bypassing higher-fee hedge fund strategies.
“2024 was a challenging year for a lot of crypto funds because it was a bitcoin and memecoins year – those were the best assets, and everything else trailed behind,” said David Kalk, Founder and CIO of Reflexive Capital, which runs its own hedge fund that invests in bitcoin, among other investments.
Beating bitcoin’s performance is challenging for crypto hedge funds because “It’s really hard to time these things,” said David Jeong, CEO of Tread.fi, an algorithmic crypto trading platform for institutional traders. “In the hedge fund world, drawdowns are quite sensitive and so you can’t just always be fully exposed long. And investors have alternative pathways to get exposure to crypto.”
Despite these challenges, funds focusing on directional and quantitative strategies achieved notable success. The VisionTrack Quant Directional Index climbed 53.7%, while the VisionTrack Fundamental Index rose 40.4%. The VisionTrack Market Neutral Index posted an 18.5% gain.
Galaxy Digital’s Alpha Liquid Fund delivered a 76.6% return in 2024, according to a source familiar with the results, although Galaxy declined to comment. David Tawil’s ProChain Master Fund, a multi-strategy crypto fund launched in 2018, added approximately 70% last year after achieving an 80% gain in 2023, thanks to significant positions in major tokens like bitcoin.
David Tawil’s ProChain Master Fund, a multi-strategy crypto fund established in 2018, gained approximately 70% last year, following an 80% surge in 2023, driven by significant investments in major tokens like bitcoin.
Funds grounded in fundamental research and macroeconomic strategies, which build high-conviction positions in crypto assets based on deep analysis of tokens or blockchains, generally performed well in 2024. Reflexive Capital, a San Francisco-based firm managing a long-biased fundamental crypto hedge fund, achieved 106% net returns last year, according to a source familiar with the results.
The Tephra Digital Asset Fund, managed by former Wall Street professionals Ryan Price and Raghav Chopra, reported approximately 100% gross returns by December, compared to 41% the previous year, according to a December investor letter dated January 6, viewed by Bloomberg News.
Most gains for crypto hedge funds occurred in the last quarter of 2024, per Galaxy’s data, fuelled by the election of president-elect Donald Trump. Once sceptical of cryptocurrencies, Trump emerged as a staunch supporter, catalysing new highs for bitcoin and other digital assets. The launch of bitcoin exchange-traded funds (ETFs) in the US further boosted market momentum. BlackRock’s iShares bitcoin Trust, launched at the start of 2024, shattered industry records by amassing over $50bn in assets within 11 months.
