Despite all the challenges at the start of 2020, cryptocurrency hedge funds have outperformed non-crypto hedge funds by a significant margin. A steady price rise since March, strong fundamentals and a flurry of institutional adoption in recent months helped crypto hedge funds achieve record gains.
Crypto Hedge Fund, Vision Hill Composite Index, which tracks the performance of actively managed cryptocurrency hedge funds, showed a return of 126% in 2020. BarclayHedge, a data group that tracks more than 7,100 hedge funds, said that the non-crypto hedge fund sector posted a modest gain of 1.70% through September.
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Bitcoin price jumped more than 100% since March this year, due to the reason that most of the crypto hedge funds have significant holdings of Bitcoin, funds tend to perform better when the world’s largest cryptocurrency shows steady growth in price. The recent boom in Decentralized Finance (DeFi) also helped the performance of crypto hedge funds. According to the data posted on DeFi Pulse, the total value locked in DeFi stands at around $11 billion as compared to $4 billion at the start of August 2020.
Institutional adoption of cryptocurrencies gathered momentum this year as large-scale organizations like PayPal, Square, Fidelity, and Nomura entered the market. Finance Magnates earlier reported that PayPal is set to allow buying, selling, and holding of cryptocurrencies on its platform. The crypto market responded positively to the news and the price of bitcoin jumped above $13,000. Grayscale, a New York-based crypto-fund manager reported $1.05 billion inflows in crypto in Q3 of 2020, an all-time record for the company surpassing the previous high of $906 million in Q2 this year. Recently, the largest bank in the United States, JPMorgan Chase announced that a large technology client has already begun using its cryptocurrency dubbed as JPM coin to settle payments worldwide.