October 20, 2023
By Sharan Kaur Phillora
In a surprising turn of events, data from Crypto Fund Research (CFR) indicates that investors withdrew over $160 million from cryptocurrency hedge funds in the third quarter of 2023, even as these funds surpassed Bitcoin’s performance by nearly 6%.
Here’s what we know:
Notably, the crypto hedge funds experienced a net outflow of $14 million in September alone, culminating in a total net flow of USD 64.4 million for Q3. This figure represents the aggregate of investor subscriptions and redemptions.
The data, curated from the CFR Performance Database, showcases the monthly returns and assets of more than 270 crypto hedge funds. Despite the outflows, the funds have reported a return of 17.7% year-to-date (YTD) through September. However, this figure pales compared to Bitcoin’s formidable 63% return within the same timeframe.
Historically, substantial redemptions occurred when crypto hedge funds underperformed compared to Bitcoin and other cryptocurrencies. Nevertheless, Q3 showcased a different narrative, with crypto hedge funds outperforming Bitcoin by 6%, even though the CFR Crypto Fund Index reported a negative return of -5.48% for the quarter, while Bitcoin declined by -11.28%.
Josh Gnaizda, the CEO of Crypto Fund Research, commented on the trend, noting that despite the relatively strong performance of crypto funds in Q3, the persistent outflows might signify a lingering apprehension among investors. He pointed out that the significant underperformance of crypto funds compared to Bitcoin in the first half of the year might have instigated investors to reconsider their positions.
The total assets managed by crypto funds increased, standing at $56.4 billion at the end of Q3, rising from $48.3 billion at the start of the year. However, this figure is still a far cry from the $69.7 billion peak recorded in Q4 of 2021. The underlying cause of this cautious investor behavior, despite a positive Q3 performance, hints at a more complex investor sentiment within the crypto hedge fund space.
About the author
Sharan Kaur Phillora’s thirst for knowledge has led her to study many different subjects, including NFTs and Blockchain technology – two emerging technologies that will change how we interact with each other in the future. When she isn’t exploring a new idea or concept, she enjoys reading literary masterpieces.
