Investors want to find the alpha, but they also want to minimize risk, especially in volatile fields like cryptocurrencies. That desire has given rise to the phenomenon of the cryptocurrency hedge fund that has been on the rise in recent years.
Basically, investors—even ones who are more risk-averse—can no longer ignore cryptocurrencies. The past few years have demonstrated that people are willing to put big money in crypto, which proves the concept and is a positive sign for continued growth. But crypto is still young, and many investors do not want full exposure to such a volatile market. Therefore, crypto hedge funds are being marketed as the perfect compromise between opportunity and risk.
But what do cryptocurrency hedge funds really have to offer? We’ve put together a list of some of the leading ones and what makes each one unique.
15 Top Cryptocurrency Hedge Funds
Polychain Capital was founded in 2016 by a crypto pioneer, Olaf Carlson-Wee who was one of the first employees of Coinbase, the largest cryptocurrency exchange in the United States. Polychain Capital is currently one of the largest global cryptocurrency hedge funds, managing over $1 billion in assets and attracting funds from leading venture capital funds. In addition to investing in digital currencies, Polychain Capital also invests in early-stage start-ups focused on disruptive blockchain technology and cryptocurrencies in an attempt to get ahead of the market.
Pantera was one of the first funds to dive into the crypto space. Founded as a traditional hedge fund in 2003, its leadership quickly recognized the potential of digital assets and shifted focus to blockchain and cryptocurrency. It’s not the fund for everyone, as there is a minimum investment of $100,000. Most of its investors are high-net-worth individuals or institutions looking to get into the cryptocurrency world.
3. Digital Currency Group/Grayscale Investments
Grayscale, a crypto hedge fund established by the Digital Currency Group (DCG), is a major fund with a huge reach and a variety of crypto investment products. Founded by Barry Silbert, who was involved in cryptocurrency startups including the wildly successful Coinbase and Bitpay, Grayscale invests heavily in bitcoin and other large-cap cryptocurrencies. DCG, its parent company, owns CoinDesk, the biggest global cryptocurrency and blockchain-related media publications company. Grayscale’s Bitcoin and Ethereum trusts are regulated by the SEC, and over 80% of Grayscale’s client base are institutional investors.
Launched in 2013, Blockchain Capital is one of the oldest cryptocurrency investment funds. It invests in publicly traded cryptocurrencies and engineered the world’s first tokenized investment fund and the industry’s first security token (BCAP). Blockchain Capital has also financed over 80 early cryptocurrency and blockchain projects.
While not a hedge fund per se, Andreessen Horowitz, or a16z, was one of the first established investment institutions to enter the world of digital assets. Andreessen Horowitz is a renowned Silicon Valley-based venture capital firm with a large dedicated cryptocurrency fund that includes 27+ publicly-disclosed investments in cryptocurrency and blockchain projects. A16z is unique because it takes a long-term approach to its investments rather than using active trading strategies.
Coin Capital invests in 40+ cryptocurrencies, as well as blockchain startups and single coin offerings. Unlike Pantera capital and other cryptocurrency hedge funds that require a large minimum investment, Coin Capital has options for smaller-scale investors as well.
Bitcoin Reserve runs an arbitrage fund that trades across different crypto exchanges in an attempt to correct market inefficiencies and reduce risk by expanding on price differentials between crypto exchanges. Like Pantera, it targets larger investors, with a minimum investment of $59,000.
Invictus Capital’s C20 fund is the world’s first tokenized cryptocurrency index fund that tracks and invests in the top 20 best-performing currencies. It’s often compared to traditional indexes like the S&P 500, which tracks the top 500 US companies. Investors receive C20 tokens that they can buy and sell, and there is no minimum investment, making it an attractive option for smaller investors.
BlockTower Capital was founded by Matthew Goetz, a Goldman Sachs executive, and boasts a team of experienced investment professionals. It focuses on trading, investing, portfolio, and risk management services for cryptocurrencies. It recently raised $25M for DeFi projects, and in March 2021, it acquired a $20M stake in Fantom, in March 2021, indicating a turn towards longer-term assets.
Galaxy Digital is another fund that targets big investors. It offers three cryptocurrency funds for short and long-term profits: Galaxy Bitcoin Funds, Galaxy Ethereum Funds, and Galaxy Crypto Index Fund, with a minimum investment of $25-$500K, depending on the fund. It is publicly traded on TSX Venture Exchange, Toronto.
This hedge fund, with offices in London, NYC, and Singapore, trades in popular coins like Bitcoin, Ethereum, Ripple, and Litecoin. There is a minimum deposit of $100,000 and investors can connect with their proprietary, quant-based trading software, BlockBerry. They can also use BlockBerry’s utility token to get up to 75% off in trading fees. KPMG audits BitSpread’s financial performance for transparency.
Altana is Europe’s first asset manager to invest in cryptocurrencies creating the Altana Digital Currency Fund (ADCF) crypto hedge fund. Altana invested in bitcoin when its price was below $100, which has translated into significant value for the fund. The company still focuses on bitcoin, but also invests in other cryptocurrencies to reduce risk using a range of strategies including automated arbitrage, momentum trading, short-term collateralized bitcoin loans, and more.
Multicoin Capital describes itself as a thesis-driven hedge—the thesis being that crypto is creating the ‘one-time wealth shift’ in history. The fund focus on existing cryptocurrencies, early-stage token launches, and blockchain providers. For example, Multicoin Capital was an early investor in Solana, a decentralized blockchain that enables scalable, user-friendly apps.
Alphabit focuses on early-stage investments and quant-based strategies for trading highly-liquid cryptocurrency pairs, mostly futures contracts. It actively seeks out deals in token and equity ownership using stringent criteria so that investors are exposed to the best opportunities. Investors pay for that effort—in addition to a minimum investment of approximately $130,000, there is also an annual management fee of 2.5% on NAV (net asset value) and 45% fee on performance.
Founded by Dr. Anna Becker, EndoTech’s cryptocurrency hedge funds leverage artificial intelligence to identify opportunities in crypto’s volatility. The fund has hundreds of millions of dollars leveraging its automated trading solution. Dr. Becker has been in the AI world for decades, having earned her PHD from the Technion – the prestigious Israeli mathematics academy.
Serving hundreds of thousands of investors, EndoTech leverages AI and automation to identify and automatically execute trades across their different funds.
EndoTech’s hedge fund solution removes discretionary trading. Discretionary trading i) rely on a limited number of expert traders who buy and sell cryptocurrencies according to a thesis ii) are prone to human errors iii) cannot be available 24/7, and iv) are subject to emotion and delay.
Their successes are due to leveraging cutting-edge technology and AI to identify opportunities in real time, and make optimized automatic trades 24/7/365, with low minimum investment. Algorithms can be easily customized to meet a client’s risk preferences, and clients maintain full control and custody of all funds through the use of separately managed account solutions.
EndoTech’s noteworthy performance is credited to algorithmic trading consistently demonstrating above-average performance, even when the crypto hedge fund industry is in a downturn like it was in the early months of 2022. That’s why algorithmic investing is a unique opportunity for risk-averse investors looking to gain sustainable alpha from crypto.
There is no question that the institutional presence in the nascent cryptocurrency industry is growing, and is expected to continue to grow in coming years. But not all crypto investment institutions are the same. Sophisticated tools, like algorithmic trading, offer new opportunities for investors looking to capitalize on the crypto market without exposure to its extreme volatility.