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Types of crypto funds and their impact on today's market

Types of crypto funds and their impact on today's market

The global financial system was hesitant to recognize cryptocurrency as a full-fledged trade asset and payment tool. However, today there are more and more opportunities and prospects for effective investment using virtual coins. This can be carried out through crypto funds.

In 2014, the first such fund was created, but up until 2017, no fund enjoyed much popularity. Things were limited by regulatory issues, namely, how to manage high volatility, how long the growth will be, how to prevent fraudulent operations.

Since 2018, more and more private investors have started showing interest in cryptocurrencies, allocating their capital to crypto funds. Already in 2020, there were over a hundred of such funds. 

Today there are more than 800 crypto funds, and most of them manage the capital of up to 10 million dollars. The largest companies succeeded in raising hundreds of millions of dollars in investments. 

Crypto funds: types, features, and benefits

A cryptocurrency fund is a dedicated fund that receives money from investors and invests it in cryptocurrencies and blockchain projects to generate profits. Such a fund aims to manage its clients' investments and achieve maximum returns efficiently. In other words, it is a common exchange fund but dealing in the cryptocurrency sector. 

Major funds focus on cooperation with institutional investors (banks, financial companies, large organizations, millionaire investors). In contrast, funds with a small turnover offer great opportunities for private investors (individuals who want to invest their capital profitably).

Today, there are already more than 800 crypto funds, and they are all based primarily in the United States, Britain, Hong Kong, Switzerland, Germany, Singapore, Canada, and Australia.

Profits generated by crypto funds are generated in the following ways:

  • investments in ICOs (initial offerings of virtual coins to promote startups, an analog of an IPO for stock exchange listings);
  • cryptocurrency purchase;
  • financing of various projects in the financial sector.

All cryptocurrency funds can be classified as follows:

  • open funds - it is the simplest type of crypto-fund, which is accessible to private investors with a minimum threshold of investment;
  • close funds - they are accessible only for selected and expert investors. This group includes the largest funds that work with institutional depositors (banks, companies, legal entities);
  • venture funds - these are crypto funds that direct capital to blockchain projects and new companies in the crypto sector. They are focused on large investments from depositors;
  • hedge funds - they invest in cryptocurrencies and profit from price fluctuations on the market.

Speaking about the key advantages of cryptocurrency funds, we can highlight the following:

  • professional and targeted management of investments that are deposited by the investor (all operations are performed by experienced traders and experts);
  • risk minimization;
  • a wide range of funds for both large and small investors;
  • there is no need to study the market on your own and go deep into its subtleties;
  • the prospect of high profits and increased profitability;
  • concentration of a large volume of tokens in a single place;
  • effective redistribution of assets, based on the current market situation.

However, the crypto funds have some negative downsides:

  • the cryptocurrency sector remains highly unstable, which leads to many associated risks;
  • lack of reliable information about the fund and the purpose of investments;
  • there is no legal protection for the investor;
  • there are many fraudulent agencies that pretend to be reliable companies;
  • when cooperating with a crypto fund it is necessary to pay a commission for transactions, causing the loss of a part of profit.

The major crypto funds 

Polychain Capital

Its founder is a former employee of Coinbase, a well-known cryptocurrency exchange. This is an American crypto fund, which has been operating since 2016 and has an active management strategy. Its investments are directed exclusively to cryptocurrencies. 

Foundation date: 2014

Investment volume: 1.4 billion dollars 

Grayscale Investments

It is among the world's largest crypto funds belonging to Digital Currency Group (DCG). It has several target divisions (trusts), each of which specializes in a particular virtual coin. Investors can earn on the growth of the rate and there is no need to physically own the specified asset.

Foundation date: 2013

Investment volume: 45 billion dollars

Pantera Capital

This crypto fund was founded in 2003 in the USA and initially operated as a conventional investment fund. Since 2013, it has been working with cryptocurrencies and venture capital.

Foundation date: 2013

Investment volume: 810 million dollars 

Crypto Currency Fund L.P.

Founded in 2017, the American crypto fund invests in blockchain startups and cryptocurrencies. It is focused on long and short strategies (transactions to buy and sell assets, respectively).

Only U.S. citizens can join, the website is not public and restricted to unauthorized users.

Foundation date: 2017

Investment volume: 200 million dollars 

Accelerated Digital Ventures

The crypto fund deals with investments in both blockchain projects and unique technologies. It works on bringing together investors and startup developers.

Foundation date: 2016

Investment volume: 180 million dollars 

BlockTower Capital

It was founded in 2017 by Matthew Getz, who previously worked as an executive at Goldman Sachs Bank. The fund operates not only in cryptocurrencies, but also in minor assets, in order to maximize financial gain through rate volatility.

Foundation date: 2017

Investment volume: 150 million dollars 

Altana Digital Currency Fund

It is the first European crypto fund, which has been operating since 2014. It uses different strategies in its activity in order to reach the maximum profit index. At the same time, it is always cautious about risks and takes care of its clients' funds.

Foundation date: 2014

Investment volume: 450 million dollars 

Galaxy Digital Assets Fund

This fund gained fame thanks to its founder Michael Novogratz, who is a well-known investor and activist in the crypto industry. The crypto fund directs its investments not only into cryptocurrencies, but also into ICOs (a form of promotion of startups and blockchain projects).

Foundation date: 2017

Investment volume: 500 million dollars

 

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