The cryptocurrency space embodies market volatility. Prices are quick to drop or spike – a fact that puts cryptocurrency directly at odds with traditional market ideologies. Despite this, investors continue to flock to the space to take advantage of the profit opportunities. The high-risk, high-reward nature of the space offers something that the traditional stock market does not. A persistent focus on short term performance gives the impression that cryptocurrency is a boom-or-bust proposition.
On a macro scale, this is not the case. Proven by cryptocurrency hedge fund manager Polychain Capital, cryptocurrency’s return over time eclipses that of traditional markets. In fact, Polychain’s fund saw over 1,330% gains since 2016. In contrast, average traditional hedge fund ROI sits closer to 13% annually. Yet, the key to Polychain’s incredible gains is a complete lack of risk aversion. After all, their returns were closer to 2,200% in 2017 – before dropping 60% the next year.
As one of the first crypto-exclusive hedge funds, Polychain Capital entered the space prior to the 2017 bubble. Through investing in cryptocurrency start-ups and early phases of ICOs, they grew rapidly – becoming the first cryptocurrency fund to exceed $1 billion valuation. When the bubble burst in early 2018, Polychain saw severely diminished returns, while still exceeding market average.
Despite recent coronavirus complications, Polychain is in the process of opening a second fund. Seeking $200 million in initial investments, the fund will begin at a similar level to the initial project. Polychain’s founder, Olaf Carlson-Wee, is a former Coinbase executive.
Normalizing Cryptocurrency Investing
Throughout the 2017 bull market, many crypto-enthusiasts sought the entrance of institutional money. Ventures like Polychain Capital have helped ease this along, but the space still lacks general infrastructure. In part, this is due to the legally grey area that much of the market exists in. The United States SEC and CFTC are generally neutral towards cryptocurrency, adopting a laissez faire approach.
However, some states – like New York – are aggressively pursuing cryptocurrency companies for even minor infractions. The patchwork laws in place are severely hampering the industry – and spell trouble for any new investment vehicles within the crypto-sphere.
Article By: Adam Stone