Bloomberg Reports Surge in Crypto Fund Launches

From January to March, 25 venture and hedge funds focused on cryptocurrency emerged in the market, marking the highest number since the second quarter of 2021. This was reported by Bloomberg, citing data from Crypto Fund Research.

In 2024, the number of new funds and organizations nearly doubled the number of closures. During the bearish 2023, this ratio was almost equal.

The bankruptcies of hedge funds Three Arrows Capital and Alameda Research have opened opportunities for new players as the market recovers, stated Joshua de Vos, head of research at CCData. He noted that the “surviving” organizations achieved double and triple-digit returns.

“Given the cyclical nature of cryptocurrency, it is highly likely that new crypto funds will emerge to fill the void left by some companies, as well as new opportunities,” added de Vos.

According to Galaxy VisionTrack, the overall market for specialized cryptocurrency hedge funds grew from $16.3 billion at the beginning of January to $21 billion by the end of March.

Among the new investment organizations, journalists highlighted:

• Frachtis by Chorus One CEO Xavier Migan;
• Topology by former partner of venture firm Paradigm Casey Caruso;
• Nazare Venture by Orchid Labs founder Stephen Waterhouse.

Increased Competition

Bailey York, head of data at VisionTrack, emphasized that the first quarter was “a good time for many actively managed fundraising strategies.”

However, the pace of new fund launches is significantly lower than during the “renaissance” of 2017, when an average of 73 new organizations were launched every three months.

Since the beginning of 2024, 631 venture deals have been recorded, totaling $2.62 billion. During the same period last year, startups raised $2.9 billion in 781 rounds.

In the first quarter of 2021, the figure reached $7.2 billion with 817 deals.

The revival of investment crypto funds is largely linked to the January launch of spot Bitcoin ETFs in the US and the May approval of applications for a similar product based on Ethereum.

“The launch of cryptocurrency hedge funds is likely to be somewhat smaller in volume than a couple of years ago. This is partly because cryptocurrency ETFs have absorbed part of the market,” explained Josh Gnaizda, CEO of Crypto Fund Research.

The founder of Frachtis emphasized that funds “still find it quite difficult to raise money.” According to him, there are not many new players in the market ready to invest.

However, Waterhouse from Nazare Venture disagreed with his conclusions:

“I would say that in 2014–2016, when I worked at Pantera, it was harder to raise money. The main question then was: ‘Does this even make sense?’ Now the question is quite different: ‘What will actually happen next and what’s so special about it?'”

As reported by CoinShares, during the week of May 11 to 17, inflows into cryptocurrency investment products amounted to $932 million.

By the end of the first quarter of 2024, hedge fund Millennium Management held spot Bitcoin ETFs worth $1.94 billion.