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October 16, 2018

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The Truth Behind Crypto Hedge Funds

February 11, 2019


How does a bear survive a long winter? What about a crypto hedge fund?


According to CoinDesk, crypto hedge funds are not what they seem to be on the surface. The reason why has to do with what they do to survive during significant market downturns as well as with the fact that overall, the blockchain industry is far less regulated than other, more established industries.


To understand this, first think about the fact that there is a difference between a venture capital fund and a hedge fund. Hedge funds are usually tracked over brief, clearly defined periods of time, while VC funds are nearly impossible to track without insider knowledge due to the fact that they are privately traded.


 CoinDesk’s article today even goes so far as to say that most crypto hedge funds are structured like VC funds while being marketed as if they were almost the same as traditional hedge funds. Their conclusion on why this happens boils down to the fact that the crypto market is much more volatile in the short term and therefore, much easier to invest in for the long haul.


While there is nothing wrong with taking a long term view of things in this respect, misleading investors is never a good plan, especially while just about every government agency in the world is watching the industry closely.


If crypto hedge funds continue to be allowed to attract investors by claiming that they are something that they are not, then the industry will continue to be seen as “the Wild West” of the greater finance world. CoinDesk claims that the solution to this is to wait until the market sorts itself out, though with almost no regulatory framework to help it to do so, it is hard to see how that is possible.




By: BGN Editorial Staff

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