Hedge funds cash in on Trump-fuelled crypto boom

A number of cryptocurrency-focused hedge funds have enjoyed a windfall in recent weeks as Donald Trump’s election victory fueled a strong rally that pushed bitcoin past the $100,000 mark.

Funds using crypto strategies posted a 46 percent gain in November, bringing their annual return to 76 percent, according to data provider Hedge Fund Research.The returns outpaced the broader industry, with the average hedge fund up 10 percent in the first 11 months of this year, it said. is the HFR.

Brevan Howard Asset Management and Galaxy Digital, the cryptocurrency investment manager founded by billionaire Mike Novogratz, have been among the biggest winners of the recent surge in digital assets.

Overwhelming gains in crypto funds since Trump’s election victory in November have added a new jolt of excitement to bitcoin, the biggest cryptocurrency’s rally this year, which has also boosted smaller tokens.

Bitcoin is up 130 percent this year to nearly $100,000, boosting the major crypto tokens’ market value by $1.8 trillion to $3.5 trillion. FT Wiltshire Digital Assets Dashboard. The crypto market retreated from recent highs this week after the Federal Reserve announced it would cut interest rates next year more than expected, hitting risk assets.

Investors are betting that Trump’s crypto-friendly nominees for top government posts will contrast with the Joe Biden administration, which has generally taken a more skeptical approach.

“Trump’s election is great news for digital assets because it will bring more clarity on the regulatory side,” said Damien Miller, managing partner at macro hedge fund MP Alpha Capital and to the blockchain.”

Brevan Howard’s main crypto fund gained 33 percent in November and is now up 51 percent in the first 11 months of the year, Brevan Howard, with $35 billion in assets, is one of the largest hedge fund managers with a dedicated crypto business that launched in 2021.

According to investors, Galaxy’s hedge fund strategy rose 43 percent in November and is up 90 percent in 2024. The New York-based group has more than doubled its assets under management to $4.8 billion in the past two years, in part because by buying assets from bankrupt crypto companies.

Galaxy and Brevan Howard declined to comment on their performance.

The recent surge in digital assets marks a stunning reversal of fortunes for a sector that has been in deep crisis since 2022.

Bitcoin hit a low of around $15,500 when Sam Bankman-Fried’s FTX exchange collapsed in November 2022. Galaxy, which sought to position itself as a full-service crypto financial services company, posted a net loss of $1 billion that year.

Cryptocurrency industry received a supplement In January 2024, when the US Securities and Exchange Commission approved 11 exchange-traded funds, opening the door to new institutional and retail investors in cryptocurrencies, BlackRock, the world’s largest asset manager, said last week that it sees “a case for incorporating bitcoin into diversified portfolios.”

NextGen Digital Venture, a $120 million crypto equity fund, is up 330 percent since its launch between March and the end of November 2023. It has benefited from positions in some bitcoin ETFs, as well as cryptocurrency exchange Coinbase and software provider turned bitcoin investor MicroStrategy.

“After the approval of the Bitcoin ETF, we felt that crypto stocks would become another opportunity for institutional investors because they already had access to Bitcoin,” said Jason Huang, founding partner of NextGen Digital Venture.

Coinbase is up nearly 60 percent since the end of 2023, while MicroStrategy is up more than 400 percent.

Some macro hedge funds, which trade currencies, commodities, bonds and stocks on macroeconomic trends, have also increased their exposure to digital assets in anticipation of a favorable market environment.MP Alpha Capital’s $20 million global macro hedge fund this year increased by more than 30 percent.

“We’ve had good results on digital assets, bitcoin, ethereum, and bitcoin miners,” Miller said, referring to companies that complete complex calculations in exchange for tokens.. “Our whole thesis over the last 18 months has been about institutional adoption of digital assets and the microphone of looser monetary policy, a weaker dollar and a liquidity-rich environment.”

Trump has signaled that crypto regulation is one of his most urgent priorities, and has named venture capitalist and Elon Musk confidant David Sachs as White House chief of staff. cryptocurrency czar.

The change in leadership at the SEC, America’s top securities regulator, has also been welcomed by crypto enthusiasts.

Gary Gensler, the current chair who called crypto a “wild west” full of lawlessness and investor risk, will step down when Trump takes office that existing securities law is sufficient guidance.

Gensler will be replaced by a cryptocurrency advocate Paul Atkins.

However, several managers have warned that bitcoin’s rise should cause investors to pause and take stock. Huang said at NextGen Digital Venture that while he is bullish on bitcoin and crypto, “no asset grows in a straight line without volatility.” :