Bitcoin. Ether. Tether. Cardano. Depending on your knowledge, you might recognise each of these as major cryptocurrencies. Cryptocurrency markets are big business. The rising prices and awareness of Bitcoin since its emergence in 2009 have drawn in investors with the promise of significant returns. From a value of US$0.0008 per Bitcoin in 2010 to a market high of US$61,374 in October 2021, there has been the potential to make significant long-term or short-term (the price in September 2021 was US$41,412) gains. Yields from cash, bonds or other traditional assets are seen as paltry in comparison, and people want in, no matter what the risks – Bitcoin dropped 20% of its value over a matter of days in June, and the value at the time of writing had dropped below US$25,000, its lowest level since late 2020. The hyperbolic growth of cryptocurrency markets has led to larger investments in what is a whole new category of specialised funds. While much cryptocurrency trading still takes place on an individual level, as people buy and sell their stashes there is an increased demand for institutionalised investment. Our research investigated the performance of funds that specialise in cryptocurrency markets, to give us a better understanding of the value of digital assets as investments and the value of fund managers in providing a positive return. We looked at the performance of 250 funds specialising in cryptocurrencies between March 2015 and June 2021. That period encompasses a significant boom until December 2017, and a major collapse in early 2018 – the socalled ICO bubble burst. After that, there was sideways movement until Covid-19. The pandemic saw a major market drop, before it soared once more as Bitcoin, Ethereum and all other major cryptocurrencies hit record highs by early 2021. WORTH THE MONEY? The value of fund managers in all markets has been widely debated, especially since the increased popularity of more passive and cheaper forms of investment, such as exchange-traded funds. We wanted to find out if fund managers can generate a return above and beyond the expenses an investor encounters. We focused on four types of fund: Hedge Funds (HF), Tokenised Funds (TF), Managed Accounts (MA), and Fund of Funds (FoF). Hedge funds (60% of our sample) and managed accounts (8%) work in the same way for crypto investors as for standard market investors, whereby high net-worth investors can access a high degree of customisation and expertise. Tokenised funds (10% of our sample) 10 |
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