Crypto Hedge Funds Underperformed Bitcoin During Rally Last Year

(Bloomberg) -- Actively managed cryptocurrency hedge-funds underperformed Bitcoin during the largest digital asset’s bull run last year, according to Crypto Fund Research.

The funds’ average rate of return was 166%, compared with a more than 300% increase in Bitcoin. During 2017’s surge, gains were about 1,100% as the dominant token burst into the mainstream consciousness with a 1,375% increase, according to the researcher. The data tracker didn’t release the names of the top performing funds.

While the funds as a whole significantly underperformed, a few breakout managers that made long bets and invested in decentralized-finance projects exceeded the average. At least one fund posted a more than 700% gain, according to Crypto Fund Research’s preliminary data. At least 10 funds registered more than 300% growth.

“The top-performing funds were funds that were long only,” said Josh Gnaizda, founder of Crypto Fund Research. “Some of them might even have levered exposure. It may also be that they have exposure to cryptos besides Bitcoin that have done well as well. Some of the DeFi products have done very well that year.”

DeFi stands for decentralized-finance applications, whose use exploded last year to allow for lending, trading and other functions without the use of intermediaries like banks. Many of them issued their own tokens, which appreciated significantly.

Crypto Fund Research said it can’t share individual funds’ rates of returns for the full year because of regulatory reasons. At the end of 2020, there were about 820 crypto funds, down slightly from the year before, the firm said.

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