Bitcoin has massively outperformed crypto hedge funds in 2023, according to a report by Switzerland-based investment adviser 21e6 Capital AG.
The report says that around 13 percent of crypto hedge funds have shut down this year due to weak performance and difficulties accessing banking services.
On average, crypto funds generated around 15 percent returns in the first half of 2023. On the other hand, Bitcoin gained 77 percent over the same period.
The underperformance of crypto hedge funds compared to Bitcoin can be attributed to various factors, including regulatory pressure and difficulties in the crypto industry. The report mentions that 97 out of the 700 crypto hedge funds tracked by the firm have closed in 2023, with some closing following the fallout of the FTX collapse.
The report notes that the market has been in a downtrend since May 2022, with Bitcoin and other cryptocurrencies experiencing significant price drops.
“All crypto fund strategies achieved positive results this year. But relative to Bitcoin, they underperformed, especially those with significant exposure to altcoins, to futures, or those strongly dependent on momentum signals,” the report concluded.
Despite challenges faced by the crypto market, some hedge funds are still bullish on cryptocurrencies. According to a survey by the Financial Times, hedge funds plan to increase their exposure significantly to cryptocurrencies by 2026. The survey found that hedge funds expect to hold seven percent of their assets in crypto within the next five years, a major vote of confidence for the industry.
However, the challenges faced by crypto hedge funds cannot be ignored. In addition to regulatory pressure, some funds have struggled to access banking services, which has made it difficult for them to operate. This has led to the closure of several funds, as mentioned earlier.
The PwC 2023 Global Crypto Hedge Fund Report highlights some of the challenges crypto hedge funds face. The report notes that traditional hedge funds are divided on cryptocurrencies, with some seeing them as a risky investment. However, crypto natives remain confident in the industry despite the market turbulence experienced in 2022.
This news comes as the cryptocurrency market continues to experience a prolonged bear market. According to a report by CryptoPotato, this is the longest crypto winter to date, with altcoins struggling and regulation changes looming.
The bear market likely will continue for some time, but there are still opportunities for investors willing to take a long-term view. According to an article on Blockworks, the current bear market is not as severe as previous ones, and Bitcoin has already started to recover from its recent lows.
It is recorded that since May 2021, the total market capitalization of cryptocurrencies has fallen from over $2.5 trillion to around $1.3 trillion. Altcoin markets have been trending downwards since then, and the bear market has lasted more than two years.
Despite the overall bearish situation, Bitcoin has been relatively stable when compared to other cryptocurrencies, and its price has been hovering around $30,000 for several months.
According to CoinMarketCap, Bitcoin topped over $31,000 a few weeks ago, hitting its highest peak in 2023, but is still struggling to break out of the sideways trend. Meanwhile, Ethereum also stayed in the $1,800 range, only briefly hitting its peak at over $2,000 last month.