Getting Personal? Hedge Funds Find Bitcoin Holds Some Appeal

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LONDON — Bitcoin, the controversial digital currency, may be finding a place in the portfolios of hedge funds.

Since its introduction in 2009, Bitcoin has been adopted by a number of hedge funds and other investors as a means of payment for goods and services, a way to store value or to conduct speculative trades. As the price of Bitcoin has risen from around $500 to more than $4,000 this year, some hedge funds see it as an additional investment opportunity.

“I don’t find it crazy that some people are incorporating Bitcoin into their portfolios,” said Paul McNamara, portfolio manager at GAM Investments in London and the manager of GAM’s Absolute Return Bond Fund. “The thing is that it’s not been tested yet in terms of how these assets are going to be managed.”

The lack of regulation of Bitcoin and other cryptocurrencies has led several banks to ban the use of credit cards for purchasing them. But many investors see that as an advantage rather than a disadvantage.

NEW YORK (Reuters) – After a rough start to the year, some hedge fund managers are warming to cryptocurrencies in a sign that bitcoin may soon see much wider use among professional investors.

Grayscale Investments, which is owned by Digital Currency Group, said its Bitcoin Investment Trust now holds 171,144 bitcoins, valued at $1.7 billion at current prices. The trust’s assets have soared nearly 20-fold since the end of 2015 and it accounts for roughly 10 percent of all bitcoin in circulation.

“The 6-year-old bitcoin investment vehicle is a favorite among individual investors and family offices,” Grayscale managing director Michael Sonnenshein said. “We are seeing growing demand from hedge funds.”

A year ago, hedge funds investing in bitcoin and other digital currencies were small by design. Today, the crypto-focused funds are growing in size as well as number.

The number of active crypto hedge funds has grown to 226 today from 120 at the start of the year, according to Autonomous NEXT. The total assets under management for all crypto hedge funds is estimated at $2 billion to $3 billion, compared with about $1 billion in January, said Lex Sokolin, global director of fintech strategy for Autonomous Research.

The increase comes as a handful of early investors in the digital currency world have decided to spin out their own funds. One example is Dan Morehead, who founded Pantera Capital Management in 2003 and started investing in crypto in 2013.

“I had been an investor for 15 years before I found something that was this asymmetrically attractive,” Mr. Morehead said. “It’s just such a unique investment opportunity.”

Pantera now has five crypto funds with $800 million under management and plans to raise another $175 million later this month.

Hedge-fund manager Mark Yusko is gaga for crypto.

He has been a huge proponent of Bitcoin and other cryptocurrencies since 2013, and he recently used the word “blockchain” 41 times in a 30-minute speech at a conference sponsored by his firm, Morgan Creek.

Now Mr. Yusko says he wants to put his money where his mouth is, as he plans to open an investment fund later this year that will give investors exposure to digital assets. The fund will be aimed at institutional investors such as pension funds, endowments and foundations, not individual investors.

The firm already manages about $2 billion in digital assets for clients who want exposure to cryptocurrencies like Bitcoin or Ethereum. The new fund will allow those clients to gain exposure via more traditional investments such as mutual funds.

Mr. Yusko says an advantage of the new fund is that it will help make alternative investments more accessible for many institutional investors that have limited investment options today. He notes that some institutions need to invest in mutual funds because its board members are not savvy about taking on risk with alternative investments such as hedge funds or private equity.

When it comes to investing in crypto, hedge fund managers are making moves.

Some investors have turned to bitcoin as a hedge against political and economic instability, but others are looking for potentially greater returns.

One of the main reasons for that is the cost of hedging bitcoin’s volatility in other markets has been less expensive than it was before the largest cryptocurrency’s rally last year.

“Cryptocurrencies could be at an inflection point where institutional interest is increasing and we’re seeing certain markets develop that allow more sophisticated investors to participate,” said Chris Matta, a partner at hedge fund firm Crescent Crypto Asset Management. “This could lead to an acceleration of price appreciation.”

The Chicago Mercantile Exchange launched bitcoin futures contracts late last year. The contracts were created by combining prices from multiple exchanges, allowing investors to bet on the future price of bitcoin without having to buy the cryptocurrency.

Still, some experts have warned that large market moves remain a risk for anyone holding digital assets. The market capitalization of cryptocurrencies dropped by about $700 billion from its peak at the beginning of this month to Tuesday, according to CoinMarketCap data.

Investors may be finding bitcoin attractive as a way to get exposure to risk without having to bet on individual stocks or specific sectors,

Bitcoin is a digital currency that has generated enormous interest as well as controversy. The currency itself has risen in value from less than $1,000 at the beginning of the year to more than $11,000 now.

This has led to some interesting developments, including hedge funds devoted to investing in cryptocurrencies.

One of these hedge funds is Amentum, which allows individuals and institutions to invest in a basket of different cryptocurrencies. The firm’s founder and chief investment officer, Tim Enneking, decided to open a fund in part because he believes that the market price of Bitcoin doesn’t reflect its true value. He also thinks that while some other cryptocurrencies are scams, others will prove valuable over time.

Bitcoin is a cryptocurrency or digital currency that uses peer-to-peer technology to facilitate instant payments. Bitcoin is the first decentralized digital currency – Its reputation has spawned copies and evolution in the space. With the largest variety of markets and the biggest value – having reached a peak of 18 billion USD – Bitcoin is here to stay. As with any new invention, there can be improvements or flaws in the initial model however the community and a team of dedicated developers are pushing to overcome any obstacle they come across. It is also the most traded cryptocurrency and one of the main entry points for all the other cryptocurrencies. The price is as unstable as always and it can go up or down by 10%-20% in a single day.

If you want to control your finances and see every transaction, bitcoin may be a good choice for you. You can keep your bitcoins yourself or store them in an online wallet, which makes transactions easy and practical. There are many websites that offer this online service, but Coinbase seems to be faster and more user-friendly than others.

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