Crypto Hedge Funds
Crypto Hedge Fund - Decentralized Cryptocurrency hedge funds (a.k.a. investment firms) offer an unfair advantage to traders that know how to do their own research. While the majority of retail investors base their trading decisions on price breakouts, marketing, and social media “hype”, those who know where to look for good advice are usually rewarded accordingly.
Cryptocurrencies ("crypto") like Bitcoin, Litecoin, Ethereum, and other altcoins like Dogecoin keep making the headlines. These digital tokens continue to attract new fans. Still, some people believe that crypto is a very high-risk and speculative type of asset. Critics cite that crypto is still in its infancy (it's not even out of its second decade yet) and isn't backed or regulated by governments like a fiat currency is.
But that doesn't mean you can't make a lot of money with crypto. Many people have, which makes it attractive to hedge fund investors. Hedge funds are partnerships (usually limited liability companies) that pool money from investors and use risky strategies to create high returns. Before you invest in a cryptocurrency hedge fund, there are some things that you should know.
The average crypto fund returned more than 128% in 2020, compared to 30% in 2019.
Successful funds have very experienced traders analyzing the market through multiple variables, for short and long-term decisions. This info is often hard to discover by regular, retail investors.
For that reason, funds are often able to predict massive spikes or downturns in the market before they occur and position themselves accordingly. By shorting and longing at the right moment, they can generate enough income to not worry about private sales and pre-sales that they are invested in.
This, in turn, makes their investment thesis pretty solid, and you will often see them ride early-token investments to the moon or to the ground – no middle way (a.k.a. dumping on listing) Unlike retail traders, due to their small allocation, a simple 3-5x is not enough to make a significant difference.
Equalize The Playing Field
The fairness in the cryptocurrency world is at a large disadvantage to small investors. We've seen recently with Coinbase's fee structure for example, that it is very difficult for average retail investors to fund their accounts and start trading. And other than Coinbase, there are not many centralized exchanges that small investors can use to make trades.
Large investors with enough capital can make significant returns on their investments (10-20% returns per month) through investment firms' channels. Most of these channels or methods require millions or billions of dollars to be traded though. These institutional investors are often waiting months or years before they can take any profits from their trading activities.
Crypto hedge fund's can provide the essential capital for traders to seize upon market opportunities and gain an unfair advantage over other crypto market participants who are in a disadvantageous position due to having relatively small amounts of trading capital.
Know The Risks
That said, it is important to realize that the market is still very volatile, filled with inexperienced investors, which in turn causes price movement that doesn’t reflect the fundamentals. Hence, it is very important to know how to use the information you come across before going “all in” in whatever seems promising.
All investments carry risk, but both hedge funds and crypto have more than average risk. When the two are combined, the amount of risk taken on nearly doubles. This means that while you can earn a lot of money very quickly in crypto hedge funds, you can also lose all of your money just as fast.
Investing in crypto is currently more on the very aggressive side than putting money into the broader stock market through a fund. That doesn't mean you shouldn't use it, but rather that you need to be aware of the risks that you are taking. What we do.