One of the hardest-hit companies during the Mar 12 crypto bloodbath were the highly leveraged crypto hedge funds, according to a recent post by Financial Times. Many of these firms are still struggling to recover from the wild swings experienced during the “Black Thursday” crash, two months ago despite the price of BTC rallying over 150% since.
Bitcoin (BTC) dropped towards the $9,100 region on Wednesday as reports of an 11-year transaction of 40 BTC shook the market. The market has well established its wild volatility but in the first five months of 2020, BTC has witnessed wild volatility causing massive market liquidations as the markets respond to the effects on the Corona Virus.
If you have followed through the market updates since the start of March 2020, then Mar 12 will stand out so far as the top cryptocurrency, BTC, dropped to the $3,800 region mark from highs of $9,000 in a couple of hours.
‘Nearly 99% Of The Portfolio Was Lost’
In a post on FT, one crypto investor explained how his belief in investing in crypto hedge funds saw him lose nearly 99% of his crypto investments during the coronavirus sell-off. Vlad Matveev, a 50-year old investor, invested $250,000 last year with California-based Cryptolab Capital, with a fixed promise of double-digit gains in either market move – up or down.
However the volatile nature of the market sent the crypto hedge fund collapsing despite the management passing on a statement that they were developing a new system that will help users trade in times of high volatility.
The rise of crypto hedge funds has enticed a number of investors to try out their luck in the market given the over-performing state of these funds in comparison with cash and bond investments. However, the fast and hard crash of the Bitcoin market in March came as a surprise causing high de-stabilization and closure of some of these funds engaging in high risk.
Cambrial Capital, a London based crypto hedge firm, also shut operations in March but the management team statement said it was to look out for more capital injection and a switch of focus to pure advisory work.
A Slow But Sure Recovery On The Way
Crypto hedge funds averagely lost 26.2 percent in March, recording their second-worst monthly loss in data stretching back to 2015. In comparison, the average loss by hedge funds in the legacy financial market stood at 8.4 percent according to data collected by the hedge fund research group, HFR.
Bitcoin and the general crypto market trend switched upwards since the Black Thursday with the top coin gaining over 145% to current $9,200 price levels. While some of the capital invested was liquidated away with the sudden crash in the market, the recent surge in BTC’s price has lifted crypto hedge fund returns this year to 13.4 percent, beating the traditional hedge fund industry average which is at a 6.7 percent loss so far in 2020.