Key Points
- Crypto funds launch at the fastest pace since 2021, catalyzed by ETFs.
- Many new funds are focused on a blend of crypto and AI.
According to the latest reports from Bloomberg, new funds focused on crypto strategies are launching at a faster pace as hype returns to the market triggered mainly by crypto ETFs.
The first three months of this year saw 25 new venture capital and hedge funds launched, which is the most since Q2 2021, Crypto Fund Research notes, quoted by Bloomberg.
This is reportedly double the number that closed during the same period and almost triple the nine funds that emerged in Q1 2023.
Three Arrows and Alameda Research bankruptcies have opened opportunities for new players to come in as the market rebounds, according to Joshua de Vos, research lead at data provider CCData. Among the surviving funds, many have seen double and triple-digit percentage returns.
Vos said that given the cyclical nature of crypto, it’s most likely that new crypto-native funds will emerge to help fill the void that was left by entities such as the ones mentioned above and take advantage of the new opportunities that come during this cycle.
Among the newly launched funds, Bloomberg mentions Frachtis, started by Xavier Meegan in February. Topology is another fund, started by Casey Caruso, a former partner at Paradigm, that aims to invest in crypto and AI.
Nazare Ventures, created by Steven Waterhouse co-founder of Orchid Labs, is another fund that invests in the intersection of crypto and AI.
The total crypto-dedicated hedge-fund market has grown from $16.3 billion in December to $21 billion for the first time since October 2022, Galaxy VisionTrack notes.
Crypto market revival is triggered by ETFs
Bloomberg credits the crypto ETFs as the main catalyst for the market revival. The US SEC has approved Bitcoin ETFs back in January and the funds that invest directly in Bitcoin saw huge success. For instance, yesterday was the tenth consecutive day of net inflows in these products, as revealed earlier today.
The total net asset value of the Bitcoin ETFs was $59 billion, according to SoSoValue data.
The crypto market also saw the SEC allowing the listing of Ethereum-based products following a rollercoaster of optimistic predicitons from the last few days.
The SEC signed off on a proposal by exchanges including Cboe Global Markets, NYSE, and Nasdaq to list products tied to ETH. The regulator approved the Ethereum spot ETF proposal of Grayscale and Bitwise to trade on the NYSE stock exchange; iShares (BlackRock) on Nasdaq; along with VanEck, ARK/21 Shares, Invesco, Fidelity and Franklin Templeton on the Cboe BZX stock exchange.
Josh Gnaizda, CEO of Crypto Fund Research, was quoted by Bloomberg as saying that the crypto hedge funds launched are likely to be “somewhat smaller” than they were a couple of years ago, and this is partly due to the fact that crypto ETFs have “cannibalized” a portion of the crypto hedge fund market.
