After a turbulent 2022, cryptocurrency hedge funds have experienced a remarkable recovery in 2023. These funds have generated an average return of 44% through December 20, marking a significant rebound from the previous year’s 52% loss. This turnaround positions cryptocurrency hedge funds as the best-performing strategy among the 29 strategies monitored.
Several cryptocurrency hedge funds stand out for their impressive performance in 2023. Pantera Capital, led by industry veteran Dan Morehead, saw its liquid-token fund surge nearly 80% by mid-December, following an 80% slump in the previous year. Chainview Capital, overseen by 31-year-old Dan Slavin, doubled its performance after an 18% decline in the previous year. Stoka Global LP, specializing in altcoins, achieved an impressive gain of 268% by the end of November under the leadership of founder Naveen Choudary, a former tech investment banker at Goldman Sachs Group Inc.
While the average performance of cryptocurrency hedge funds falls behind Bitcoin’s over 150% rally in 2023, the positive reversal is seen as a promising sign for an industry still recovering from various challenges. These challenges include the collapse of FTX and the ensuing fallout, redemptions, and banking obstacles, which led to the demise of around one-third of all crypto hedge funds. However, despite this resurgence, the average performance still lags behind Bitcoin’s impressive gain by approximately 120 percentage points. Additionally, when compared to passive crypto funds, cryptocurrency hedge funds still fall short, with passive funds recording average returns of around 265% in the past year.
Industry experts and fund managers remain optimistic about the future of cryptocurrency hedge funds. Greg Moritz, the co-founder and COO of Alt-Tab Capital, foresees a positive trajectory for the crypto market. He cites macroeconomic factors, such as the stabilization of inflation and the Federal Reserve’s shift away from rate hikes, as well as the upcoming Bitcoin halving, which is expected to reduce the cryptocurrency’s supply, as drivers of a future boost. Dan Slavin, the founder of Chainview Capital, shares this optimism and draws parallels to the token mania experienced three years ago when Bitcoin surged to record highs. As Bitcoin continues its upward trajectory, prospective investors are increasingly engaging with fund managers, and hedging strategies remain cost-effective.
Preparing for Growth
Fund managers are positioning themselves for a bullish ride in 2024. Chainview Capital’s Dan Slavin plans to expand his team and transform the existing “two-man show.” Pantera Capital’s liquid-token fund, led by Cosmo Jiang, also plans to leverage the potential of altcoins in the coming year. Historically, altcoins have outperformed during the latter stages of a market rally following Bitcoin’s ascent.
The resurgence of cryptocurrency hedge funds in 2023 represents a remarkable turnaround for the industry. While the average performance still has room for improvement, the positive reversal and the success stories of individual funds provide hope for a prosperous 2024. As the crypto market evolves and attracts more investors, the future of cryptocurrency hedge funds looks promising.