Crypto fund sentiment has always been an indicator of the stability and prospects of the cryptocurrency market. Increasing institutional confidence in a particular industry speaks to its maturity and projected success. Decreasing activity — about possible stagnation or decline.
In this article, we’ll explore how crypto funds are impacting the market today, what strategies top crypto funds are pursuing in 2024, and what cryptocurrency fund trends analysts are watching.
Cryptocurrency funds are investment funds that manage investments in crypto assets or crypto projects. Digital assets in crypto fund portfolios can be combined with other types of assets. Crypto fund strategies aim to provide investors with maximum returns. Managers receive a commission from the total investment performance. In many countries, companies are prohibited from investing directly in cryptocurrencies, so investing in crypto funds is the only legal way for large investors to invest in digital assets.”
Crypto Fund Market Situation
According to Crypto Fund Research’s analysis of cryto funds, as of the beginning of this year, the US remains the dominant jurisdiction for crypto fund managers (more than half of all crypto funds are based in North America). Approximately 20% each are registered in Europe and Asia. At the same time, the first quarter was marked by an increase in the number and volume of the crypto fund market (it turned out to be almost three times higher than the indicators of the same period last year). The collapse of Alameda Research, Three Arrows Capital and a number of other bankruptcies in 2022-2023 undermined the interest of funds in cryptocurrency markets. However, by the end of last year, a positive trend was already evident as the crypto industry began to saturate institutional capital. The funds that remained active showed tremendous profitability, filling the vacuum created and riding the wave of the market’s exit from the cryptocurrency.
From January to March, Bloomberg recorded a sharp increase in the number of crypto funds: 25 new venture capital and hedge funds entered the market, ready to capitalize on all the new opportunities of the bullish trend. According to the Galaxy Vision Track report, the crypto hedge fund market grew from $16.3 billion to $21 billion in the first quarter of 2024, surpassing the October 2022 results for the first time. The rebound in crypto funds was largely driven by expectations for the launch of spot bitcoin and ethereum ETFs in the first half of 2024.
Crypto fund management teams admit that it has not become easier to raise money, but while in 2014-2015 investors were hesitant to invest in the crypto sector, today they are more concerned about the prospects for the development of a particular project.
Spot bitcoin ETFs hold almost 5% of the market supply
And the numbers are impressive. As of late spring 2024, spot ETFs had accumulated about 5% of total bitcoin supply, according to Dune Analytics. Since the SEC approved spot bitcoin ETFs in January of this year, the funds have invested in and held approximately 852,000 BTC as of the end of May. There are 32 spot funds in the global market, the largest of which are issued by financial giants BlackRock and Grayscale. They have raised 288,084 BTC and 284,027 BTC respectively. Let’s take a closer look at these and other major crypto funds.
BlackRock
As of early June 2024, BlackRock’s IBIT (iShares Bitcoin Trust) has surpassed GBTC (Grayscale Bitcoin Trust) to become the leader in the spot bitcoin ETF race. IBIT holds approximately $20 billion worth of bitcoins.
IBIT’s buying activity has increased amid bullish sentiment toward bitcoin, as well as following the approval of Ethereum ETF listing in late May and increased support for the cryptocurrency sector among U.S. political parties.
According to Bloomberg data, the leading positions in the spot bitcoin ETF rally are held by IBIT and GBTC, while the honorable third position is held by Fidelity’s ETF, which has managed to accumulate $11.1 billion since its launch in January.
The iShares Bitcoin Trust is a cryptocurrency ETF from BlackRock, the world’s largest investment company. The company was founded in 1998, and at the end of the first quarter of 2024, BlackRock had $10.5 trillion in assets under management. IBIT was founded in 2023 and invests exclusively in bitcoin. It allows cautious investors to invest in the world’s first cryptocurrency while remaining within the regulatory framework of traditional financial markets.
Grayscale
Grayscale Investments is the largest cryptocurrency fund, part of the Digital Currency Group (DCG). DCG was founded in 2015 by Barry Silbert, a billionaire and one of the first major bitcoin investors. Grayscale Investments manages mutual funds and other investment products. With over $50 billion in assets under management, some of Grayscale’s trusts are focused on a single virtual asset, such as the Bitcoin Trust (GBTC) and the Ethereum Trust. The group has also invested in over two hundred well-known blockchain and crypto projects, including Circle, Coinbase, Lightning Network, BitPay, Chainalysis, Ripple and ZCash.
In March 2024, Grayscale Investments announced the launch of the Grayscale Dynamic Income Fund (GDIF) crypto fund, which will generate returns by stacking liquid crypto coins. The fund’s portfolio includes coins such as Aptos, TIA, ATOM, NEAR, DOT, SEI, SOL and others.
Pantera Capital
According to Bloomberg, the Liquid Token Fund crypto fund (a subsidiary fund of financial giant Pantera Capital) had a 66% return for the first quarter of 2024. The crypto fund posted such a remarkable return primarily due to its investments in Solana (SOL), Ribbon Finance (RBN), Aevo (AEVO), and Stacks (STX), which have shown significant growth.
Liquid Token Fund is Pantera Capital’s crypto fund dedicated to investing in publicly traded and highly liquid tokens. Pantera Capital also offers the following cryptocurrency investment funds:
Since 2013, Pantera Capital Investment Fund has specialized exclusively in digital assets and blockchain projects. At the time of writing, it manages $4.7 billion in assets and is an investor in 100 blockchain companies and 110 early-stage tokenized projects. Its portfolio includes 1inch, Acala, Arbitrum, Circle, Coinbase, Cosmos, Kusama, NEAR, Ripple and many others.
A16z — Andreessen Horowitz
Andreessen Horowitz (a16z) is one of the most well-known innovative investment funds and was founded in 2012 by Marc Andreessen and Ben Horowitz.
Recognized in crypto fund rankings for its bold approaches, a16z invests in projects from “bold entrepreneurs creating the future through technology” at all stages of the funding cycle (from seed rounds to Series C).
The company consists of numerous funds with $42 billion in assets under management. a16z crypto is one of them. It specializes in venture capital investments in crypto and web3 startups. This innovative crypto fund manages $7.6 billion in assets and is an investor in hundreds of successful projects, including Uniswap, Compound, CryptoKitties, Axie Infinity and many others. The investment fund likes to invest in gaming and NFT projects, and plans to invest in startups that combine blockchain and artificial intelligence in 2024.
Paradigm
Paradigm was founded in 2018 by Matt Huang, a partner at Sequoia Capital, and Fred Ehrsam, a co-founder of Coinbase. The fund’s primary activity is to provide financial and administrative support to crypto entrepreneurs at the earliest stages of their projects’ development.
Paradigm’s team provides start-up and ongoing project support, from technical aspects (mechanism design, security, engineering) to operational aspects (recruiting, market entry, legal and regulatory framework). The venture capital firm’s portfolio includes startups with multi-million dollar budgets such as Aztec, Lido, Matrixport, Chainalisys, Blur, dYdX and many others.
How crypto investment fund teams evaluate projects
The best crypto funds have billions of dollars under management, and their management teams are made up of highly skilled and highly paid professionals. Management teams inсlude cryptocurrency consultants, financiers, lawyers, marketers, developers, designers, operations managers – all working to improve the efficiency of crypto funds. And this can only be achieved with a competent selection of the project, its adequate evaluation and careful ongoing support. After all, any project failures or slowdowns turn into reputational and financial risks for crypto funds.
Small funds often have enough external trust factors (ratings, related analytical information). However, the larger the fund, the more meticulous and lengthy the evaluation. It is usually done in two stages:
- Initial assessment. At this stage, the management company dives into the project: it examines the product itself and its stage of development, its competitive characteristics, target audience, development strategies, roadmap, prototype, technical documentation, team qualifications, monetization plan, funding status, traction (metrics already achieved), and reconciliation of the real needs of the project with the requested amount.
- In-depth performance evaluation. This is an in-depth review of the data collected during the initial evaluation process, based on which the investment decision is made. A detailed development plan, unit economics per user, risks, and revenue projections are developed, which crypto funds use to prepare an offer to investors.
It is important for startup teams to realize that the flow of applications from serious crypto funds is huge, and to get a chance for at least an initial evaluation, you need to seriously prepare. Typically, funds look for startups that have at least the following
Conclusion
As we can see, crypto fund forecasts in 2024 are improving, following the market and at the same time fueling it. After the successful launch of crypto fund ETFs for bitcoin and ether, the approval of similar products for other digital assets may serve as an additional trigger for the market. The whole market is closely watching the development of the situation, and now analysts are at the stage of discussing whether the SEC can approve the launch of ETFs for other altcoins in principle. In any case, JPMorgan experts believe that approval is impossible until Congress excludes digital assets from the category of securities (today only bitcoin and ethereum are exceptions). First in line today is Solana with the SOL coin.
Thank you for your attention. Make profitable and secure cryptocurrency investments!
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