Digital Assets Report


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Cryptocurrency hedge funds’ stratospheric rise continues, as more managers join bitcoin stampede

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Hedge funds are continuing to profit from the ongoing surge in cryptocurrencies, as more managers pour money into digital assets’ record rise this year.

Hedge funds trading blockchain digital currency and distributed ledger technologies, as measured by Hedge Fund Research’s Blockchain Composite Index, soared over 48 per cent in January, opening 2021 in style after gaining a remarkable 189 per cent last year.

Meanwhile, HFR’s Cryptocurrency Index – a performance-based benchmark of fundamental and quantitative hedge funds that trade cryptocurrencies directly, including bitcoin, ether, litecoin, as well as new initial coin offerings – was also up more than 48 per cent in January, following 2020’s astonishing 193.6 per cent return.

US hedge fund veteran Bill Miller’s long-running flagship fund has stepped into the bitcoin space, as the world’s foremost digital currency hit record highs of some USD44,000 earlier this week.

Filings with the US Securities and Exchange Commission show the USD2.7 billion Miller Opportunity strategy will invest in cryptocurrencies through the Grayscale Bitcoin Trust, a bitcoin-focused private investment vehicle.

Miller, a long-standing bitcoin evangelist, is one of several high-profile hedge fund luminaries to seize on the crypto surge in recent years.

Paul Tudor-Jones, the macro-focused founder of Tudor Investment Corp, and Michael Novogratz, the Fortress Investment Group manager who now runs digital assets specialist Galaxy Investment Partners, are two well-known crypto converts. Altana Wealth, the hedge fund firm set up by Lee Robinson, the veteran Trafalgar Asset Managers co-founder and former Tudor Corp trader, has also been a prime mover in this corner of the hedge fund sector.

Last year, Raoul Paul, a former Goldman Sachs hedge fund manager and CEO of Global Macro Investor, hailed bitcoin as “the biggest trade of our lifetimes”.

Earlier this week, bitcoin rose higher after Tesla bought some USD1.5 billion worth of the currency, with Elon Musk’s electric vehicle pioneer reportedly set to accept the digital currency as a payment method for its products.

As more hedge fund managers join the digital currency stampede, Lyxor Asset Management said recently that the early days of simple long bets on assets such bitcoin (BTC) , ether (ETH), or ripple (XRP) are making way for more sophisticated asset-linked strategies, including swaps, futures and options indexed on cryptocurrencies, and punts on income generated by underlying technology.

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