Hedge Funds Bounce Back After 2022 Turmoil
Surviving cryptocurrency hedge funds are staging a strong recovery in 2023, with many poised for even greater success in 2024.
- Pantera Capital, one of the industry’s oldest and largest funds, saw its liquid token fund surge nearly 80% YTD (as of mid-December) after an 80% drop in 2022.
- Chainview Capital doubled its 2023 gains following an 18% decline in 2022.
- Stoka Global LP, specializing in altcoins, reported a staggering 268% return through November 30.
While the average fund performance trails Bitcoin’s 150%+ rally this year, the rebound signals resilience for an industry battered by the FTX collapse, bank de-risking, and mass redemptions—which wiped out ~1/3 of crypto hedge funds.
👉 Why altcoins could outperform Bitcoin in 2024
Market Optimism Fuels Preparations for 2024
With Bitcoin’s price sustained by expectations of a U.S. spot ETF approval, funds are positioning for what they believe will be a transformative year:
"A new token frenzy seems imminent," said Chainview’s Dan Slavin, comparing current market sentiment to the pre-bull-run optimism of 2020.
Key Drivers for 2024:
- Macroeconomic tailwinds: Stabilizing inflation, paused Fed rate hikes.
- Bitcoin halving (April 2024), reducing new supply.
- Potential altcoin surge following Bitcoin’s dominance phase.
Performance Benchmarks: A Mixed Bag
- Bloomberg’s crypto hedge fund index shows a 44% average return YTD (vs. -52% in 2022).
- Passive crypto funds outperformed actively managed ones, averaging ~265% gains over the past year (CoinShares data).
Survival Challenges:
- Galaxy Digital’s VisionTrack noted ~250 of 712 tracked funds shuttered in the past 18 months.
- "2022’s underperformers faced heavy redemptions in early 2023," explained Galaxy’s Bailey York.
Strategic Shifts: Altcoins and Secondary Markets
- Pantera Capital is overweighting altcoins (e.g., dYdX) with <40% exposure to Bitcoin + Ethereum.
- Funds like Alt Tab Capital (up ~30% in 2023) are settling FTX-related claims via secondary markets.
"Next year is the breakout celebration," predicted Alt Tab’s Greg Moritz, citing aggressive positioning for the coming bull run.
FAQ
Q: Why are crypto hedge funds optimistic about 2024?
A: Anticipated spot ETF approvals, Bitcoin halving, and historical altcoin rallies post-Bitcoin peaks fuel confidence.
Q: How did passive funds outperform hedge funds in 2023?
A: Broad crypto market rallies favored low-fee index strategies over active stockpicking.
Q: What’s the biggest risk for 2024?
A: Regulatory crackdowns or ETF rejections could dampen institutional adoption.
👉 Expert insights on navigating crypto volatility
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