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Crypto Hedge Fund Holdings Spiked 40% in Q1 2019 to Whopping $14.4 Billion

Last Updated March 4, 2021 2:44 PM
P. H. Madore
Last Updated March 4, 2021 2:44 PM

By CCN.com: According to a Circle Research report, crypto hedge funds, private equity firms, and venture capitalists increased their holdings by almost 40% in the first quarter of this year.

A massive quarter-over-quarter gain, the increases took place before the most recent “bull run,” which means that the same figure might see even larger gains for the second quarter and beyond. Whatever happens in the marketplace, it might be a stellar year for the crypto investment industry in its professional form.


Another intriguing fact uncovered by Circle Research today is that nearly 20% of all Ether in circulation are locked in various smart contracts, from MakerDAO CDPs to Augur prediction markets. Uniswap, a decentralized exchange product, increased its locked up ether supply by 15 fold over the course of the first quarter.

Dai struggles to maintain dollar status

The report also comments on the status of Dai, which has lately struggled to maintain its dollar peg. At press time, Dai was just one cent off, perhaps due to recent changes in CDP fees. The algorithmic stablecoin has battled a swiftly growing supply, which has led to changes in the structure of CDPs – making it more expensive to create CDPs in an effort to lower the drive for creating new Dai. At some points Dai has fallen as low as 95 cents, which is bad for a stablecoin.

Of the stablecoins displayed, USDC has been the least volatile and DAI the most in 1Q-2Q19. DAI has been struggling to reach its $1 target price due to an excess supply. YTD, DAI hit a low of $0.95. From Diar’s March 18 issue, a potential reason could have been “a short window of opportunity to purchase Dai at a discount [on Stablewire] that threw Dai’s ability to hold its peg.” […] [S]tablecoins like USDC and USDT have a greater amount of token pairs. As a result, traders who mint DAI have to sell it for other stablecoins to trade in and out of altcoins, creating sell pressure on DAI.

USDC has reportedly experienced the least volatility. It is the only stablecoin listed on Coinbase’s retail product and by far the most successful stablecoin launched within the last year, with a market capitalization occasionally pushing half a billion dollars. USDC is issued by Circle and Coinbase.

At press time, however, it was just over a quarter billion. The market capitalization of a stablecoin is important because it represents how much faith have in the pegged-coin and gives insight into how people are feeling about the wider crypto market. If stablecoins see a sudden spike in usage, it could be a sign that people are attempting to secure their gains before a wipeout in the major categories like Bitcoin.

Initial exchange offerings expected to continue

The 81-page report covers a variety of topics. Circle owns Poloniex, one of the longest-lasting altcoin exchanges, but only uses the word 4 times in the report. They do mention that they have only an “A” as transparency scores  go, while a few exchanges have an “A+.”

Poloniex’s product manager Christina Pawlikowski is quoted in the report:

Exchanges are also branching out into new ways of generating revenue, most notably by offering staking as a service. I’d expect both trends to continue as the market continues to mature and consolidate.

She also says that exchanges are moving towards “initial exchange offerings.” This recent trend among exchanges may be viewed with a great deal of suspicion by many in the industry, who see it both as a cash grab and potentially leading to foul play, like the launching of dozens of exchanges which are never intended to actually make money, just raise funds during their “initial exchange offering” events.