Crypto Hedge Funds Could Leave the Market
Cryptocurrency hedge funds are preparing to flee the market, according to Morgan Creek founder Anthony Pompliano. And all because of a massive collapse in prices, which in less than a week erased almost $60 billion from the market capitalization of cryptocurrencies.
November 20, Bitcoin struck another bottom in 2018 and fell to $4,600. This is the lowest rate in more than a year. The total capitalization of the cryptocurrency market dropped from $210 billion last Wednesday to $153 billion at the press time. Experts agree the decline will continue.
According to Anthony Pompliano, such a steep fall will cause a severe effect on the entire crypto industry, and especially on cryptocurrency hedge funds. After all, managers of such funds receive a commission for the good performance of their investments. Simply put, if an asset showed growth for a certain investment period and investors made a profit, managers receive a premium.
For example, last year the BTC experienced an incredible growth, reaching a historic high of almost $20,000. It helped the funds to show an impressive result, and managers could earn money on bonuses.
This year differs. Anthony Pompliano claims that net asset values fell by 50-80% in some crypto funds. This means that managers cannot count on the commission. Moreover, to receive the premium next year, their assets must be at least twice as expensive.
Therefore, Morgan Creek founder is sure that soon the majority of cryptocurrency hedge funds will close and return money to investors. A few months later, managers can establish new funds with new parameters.
Meantime, funds are not closing due to the youth, and inexperience of managers, says Pompliano. But after two months, when payday comes, they will “feel the pain” and will think about fleeing the market.