Crypto-Fund Assets at All-Time High Despite Bear Market

• 239 new crypto-related investment and venture funds pulled up their shutters in 2018, according to Crypto Fund Research
• Total assets under management by the 741 funds the company tracks now exceeds $10bn 
• While the boom largely came in early 2018, 42 funds shut down in the later part of the year 

A record 239 crypto funds launched in 2018, leading to a record amount of assets under management. However, fund closures also spiked, according to Crypto Fund Research.

According to new research, the last 12 months has proved a tumultuous year for investment funds looking to ride the late-2017 boom in cryptocurrencies. 

A new report from Crypto Fund Research, which looks to provide a comprehensive listing of the firms offering crypto-related investment opportunities, reckons that the last 13 months has seen a record number of fund launches, but also a relatively large number of closures. According to its figures, 239 new funds launched during 2018, a record number, but that as prices fell back 80% on their early-year highs, the latter part of 2018 also saw over 40 fund closures. 

While 2017 had seen 224 fund open their doors to investors, closures were negligible as the market capitalisation of cryptocurrencies sky-rocketed in late Autumn and Winter of that year. With Bitcoin hitting its all-time high in mid-December 2017, it is perhaps unsurprising to see that the vast majority of the 2018 launches came in Q1 of the year, with a quarter of the total - 64, opening in January alone.

Equally predictably, according to Josh Gnaizda, CEO of Crypto Fund Research, the ensuing three-quarters of the year saw a marked downturn in interest as prices and volumes settled into a steady, year-long decline.  

“Since that time,” he says, “we’ve seen not only fewer launches, but also an increasing number of funds being dissolved."

“We expect this trend to continue in the short-term,” he added. 

Only 10 new funds came on-line in December. With crypto prices also standing at something like 1/6th of  where they were in January, it provides something of a correlation between the two metrics.  

The net effect of these starts, closures, and declining prices however, is that the total amount of assets under management in the crypto fund space is at its highest level ever. Indeed, the net inflow of money to new and existing funds has been enough to push total investment in the 741 funds listed by Crypto Fund Research to over $10bn - a net rise of over $3.5bn over the course of 2018. 

The new interest in the crypto space seen during the year meant that almost 20% of all new hedge funds created during 2018 were crypto-driven. Similarly, around a quarter of all new US venture capital funds were dedicated to investing in the technology. Overall, the sector is dominated by ‘smaller’ concerns, with over half (398) having less than five employees, and a similar number (360) having less than $10m of assets under management. 

The United States has been, and will continue to be, the primary driver in the increase in funds overall. It currently hosts close to half of all 741 funds covered by the analysis - with San Francisco and New York both serving as home to around a third of those. Only 104 of the 272 crypto funds the research locates in the USA are register with the SEC at the time of writing. 

Top 10 Largest Crypto Funds

Of the 39 funds Crypto Fund Research identifies as having assets of more than $100m, it lists its Top 10 as being Arrington XRP Capital, BlockTower Capital, Brian Kelly Capital Management, Digital Currency Group, Fenbushi Capital, Galaxy Digital Assets Fund, Metastable Capital, Pantera Capital, Polychain Capital, and Protocol Capital. It notes this Top 10 is in “no particular order” and is “based primarily on their overall prominence.” 

Galaxy Digital head, high-profile crypto bull, and former Goldman Sachs partner, Michael Novogratz has repeatedly used social media and interviews to note how difficult a year 2018 has been for investors in crypto. Most recently, he described the current market as “a grind”, but encouraged investors to “stay the course” - having made predictions of All-Time Highs for Bitcoin in 2019 - and once again expressed his confidence that institutional money would come into the space and drive the market northwards again.