Picture this: it’s a new day in the arena of cryptocurrency. The champions of previous rounds, the crypto funds, were once hailed for their stellar performance against Bitcoin during prosperous bull runs. Yet, in a surprising twist of fate, they found themselves facing a formidable opponent this year. Who is this newcomer, you ask? None other than the tried-and-true strategy of simply holding on to Bitcoin. In the face of adversity, this ‘hodl’ method swooped in with a whopping 68.8% lead against most crypto funds in the first half of 2023.
This ain’t just any wild guess. Straight from the horse’s mouth, the Switzerland-based advising whizzes at 21e6 Capital AG reveal that while crypto funds managed a decent 15.2% return during H1, Bitcoin holders hit the jackpot with around 84% gains.
Crypto funds on average generated 15.2% return in the first half of 2023 lol pic.twitter.com/vb8pwYfiX9— Alex Krüger (@krugermacro) August 5, 2023
Maximilian Bruckner, the marketing maestro at 21e6 Capital AG, takes us back to the good old days when crypto funds would consistently upstage Bitcoin in bull runs. But oh, how the tables have turned in 2023! He pointed to the hard-knock market conditions and the heft of cash these funds were sitting on in late 2022 as the root causes.
Bruckner dug deeper and unfolded the tale of 2022’s upheaval. A domino effect that saw the downfall of FTX and other crypto projects caused many funds to chicken out, stock up on cash buffers, and unintentionally miss out on Bitcoin’s significant price rally in the first half of 2023.
Now here’s the kicker: having a mountain of cash can be a double-edged sword. “In a bull market, unless their assets outdo Bitcoin, those funds with fat wallets will fall behind,” he warned. The aftermath of 2022’s turmoil left many funds with bulging cash positions, a situation that didn’t quite cut the mustard. Plus, most heavyweight altcoins were outpaced by Bitcoin, making things worse for these funds.
As I scribble this down, Bitcoin is hovering around $29,000 and having a tough time breaking through the $30,000 barrier, a feat achieved only sporadically this year. However, don’t let this fool you. Despite these battles, Bitcoin has still managed to swell by 75% since the start of the year, as per the folks at CoinGecko.
Sure, the crypto funds didn’t crash and burn. They managed to turn a profit. Yet, when compared to Bitcoin, they were left eating dust. This was particularly true for those funds heavily invested in altcoins, futures, or those that rely heavily on momentum signals.
“As we move forward,” says the report, “we’re keeping a hawk-eye on the exchanges that will rise to the top as leading futures providers.” It also signals that the funding rates in crypto futures markets and the ability of quantitative funds to spot trends are crucial to watch.
The silver lining is that investor sentiment saw a wee bit of improvement in H1 2023. So, it’s possible some funds might soon start shelling out more cash in the crypto world. But, the report cautions that we aren’t quite there yet. The current inflow and outflow data suggests a full bounce back in sentiment isn’t on the horizon just yet. Talk about a cliffhanger, huh?