Cryptocurrency hedge funds have made a remarkable comeback in 2023, with an average return of 44% as of December 20. This impressive rebound comes after a challenging year in 2022, where these funds experienced a significant loss of 52%. Out of the 29 strategies monitored, cryptocurrency hedge funds emerged as the top-performing investment strategy. This resurgence has sparked optimism among fund managers and investors alike, as they anticipate a prosperous year ahead in 2024.
One of the standout performers in the cryptocurrency hedge fund space is Pantera Capital, led by industry veteran Dan Morehead. The fund’s liquid-token fund saw a surge of nearly 80% by mid-December, bouncing back from an 80% slump in 2022. Another impressive recovery was seen in Chainview Capital, overseen by 31-year-old Dan Slavin. The fund doubled its performance after an 18% decline in the previous year. Stoka Global LP, specializing in altcoins, also achieved remarkable gains, with a 268% increase by November 30, according to its founder, Naveen Choudary.
While the average performance of cryptocurrency hedge funds did not match the over 150% rally of Bitcoin in 2023, the positive reversal is seen as uplifting news for an industry that has been recovering from various challenges. These challenges include the collapse of FTX in the previous year, which led to the demise of approximately one-third of all crypto hedge funds. Despite this resurgence, the average performance of these funds still falls significantly short of Bitcoin’s impressive gain in 2023 by approximately 120 percentage points.
When compared to passive crypto funds, cryptocurrency hedge funds still have some catching up to do. On average, passive crypto funds recorded returns of around 265% in the past year, outperforming hedge funds. However, this underperformance does not deter industry experts from having an optimistic outlook for the crypto market in the coming year.
Greg Moritz, the co-founder and COO of Alt-Tab Capital, foresees a positive trajectory for the crypto market in 2024. Moritz predicts that a convergence of macroeconomic and industry-specific factors, such as the stabilization of inflation and the Federal Reserve’s shift away from rate hikes, will drive a boost in the crypto market. Additionally, the upcoming Bitcoin halving, expected to reduce the cryptocurrency’s supply, is also anticipated to have a positive impact.
Dan Slavin, the founder of Chainview Capital, expresses optimism about a potential resurgence of token mania in the crypto market, drawing parallels to the mood experienced three years ago when Bitcoin surged to record highs. As Bitcoin continues its upward trajectory, more prospective investors are engaging with fund managers, and hedging strategies remain cost-effective. Slavin plans to expand his team and transform the existing “two-man show” to capitalize on the favorable market conditions.
Pantera Capital’s liquid-token fund, led by Cosmo Jiang, positions itself for a bullish ride in 2024, focusing on altcoins. Historically, altcoins have outperformed during the latter stages of a market rally following Bitcoin’s ascent. With a diversified portfolio of altcoins, Pantera Capital aims to take advantage of the potential growth in this sector.
The rebound of cryptocurrency hedge funds in 2023 signals a positive shift for the industry. Despite facing substantial challenges in the previous year, these funds have managed to recover and deliver impressive returns. With optimistic predictions for 2024, the crypto market holds the promise of further growth and opportunities for investors and fund managers alike.