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Emergence of $100M Crypto Funds in Bear Market Shows Investors are Interested

Last Updated March 4, 2021 3:48 PM
Joseph Young
Last Updated March 4, 2021 3:48 PM

Over the past month, four major $100 million crypto hedge funds have debuted with strong backing from institutional investors, Wall Street, and high profile individual investors.

Reality Shares, former Point72 Asset Management executive Travis Kling, and JCE Capital Management have announced the launch of $100 million hedge funds targeted at the cryptocurrency market.

Most recently, former Bain Capital Ventures partner Alexander Pack and Ceyuan Ventures founder Bo Feng formed a $100 million fund called Dragonfly Capital Partners, to establish a diverse portfolio of crypto-first funds, protocols, and infrastructure-building startups.

Investors are Interested

Perhaps to compete against existing hedge funds in the cryptocurrency sector, Dragonfly Capital Partners co-founder Alexander Pack said that the firm will invest in startups, protocols, and applications that have a strong vision of transform various industries with the blockchain, outside of finance.

“Crypto is a new asset class, and it made sense to have a new firm to support it. We thought older ones would have a disadvantage,” Pack said, adding, “we try to take a very long-term perspective. Crypto has the power to transform things at a deeper layer. Not just money—transforming what we think of as property.”

Blockchain development is essentially solving unmatched cryptographic problems effectively scale and improve the capacity of a decentralized protocol. Hence, the strategy of Dragonfly to support the long-term vision of ambitious blockchain projects will require years of development and rapid progress.

The $100 million Dragonfly has raised this month to launch its hedge fund demonstrates the intent of investors to place long-term bets on the cryptocurrency sector and blockchain space in a period of uncertainty and doubt.

In July, Digital Currency Group’s Grayscale also raised more than $250 million in the first half of 2018 from investors in the traditional finance market, despite the 80 percent decline in the valuation of the cryptocurrency market.

In its official report, Grayscale said that the demand for the company’s hedge fund and investment vehicles experienced an unprecedented rate of acceleration. The team wrote :

“As the investment community knows, over the last six months, the digital asset market experienced one of the largest price drawdowns since the inception of Bitcoin in 2009. However, what is more interesting, and somewhat counterintuitive, is that the pace of investment into Grayscale products has accelerated to a level that we have not seen before. In fact, we raised nearly $250 million in new assets in the first half of this year, marking the strongest inflows of any six month period in the history of our business.”

Market Trend

The cryptocurrency market is quite clearly still in a bear market with major cryptocurrencies like Bitcoin, Ethereum, and Ripple unable to demonstrate strong momentum and large upside breakouts.

But, investors are still comfortable in investing large sums of capital to back emerging startups and projects. In a phase like this, it is more risky to invest in emerging startups than in established cryptocurrencies.

The approach of most hedge funds and high profile investors, both retail and institutions, represent confidence of investors in the long-term growth of the cryptocurrency sector.

Featured image from Shutterstock.