Hedge funds see the decline in the crypto market as an investment opportunity

Since reaching a high of $2.5 trillion in early May, the market value of cryptocurrencies has fallen by more than 40%, but institutional investors continue to flood the market. Although Bitcoin (Bitcoin) Lost more than half of the value of the US dollar and altcoins fell nearly 70% on average, and big money players like hedge funds are still holding digital currency investment positions.

From direct exposure to cryptocurrency to companies that support the development of products and services in the field of digital assets, institutional investors are building a more important influence in the field of cryptocurrency and blockchain.As early as June, a survey of 100 global hedge fund chief financial officers showed Expected increase in cryptocurrency exposure Hedge funds in the next five years.

As regulated entities continue to explore digital currency investment options, many jurisdictions also appear to be forming encryption regulations. At the same time, in the United States, regulatory agencies such as the Securities and Exchange Commission are facing tremendous pressure to require a stricter legal framework for cryptocurrencies.

The attractiveness of crypto investment remains strong

In early July, Cointelegraph reported that London-based hedge fund giant Marshall Wace will create a A portfolio focused on digital assetsAccording to the report, this $55 billion hedge fund is seeking to provide late-stage funding for digital financial companies and blockchain institutions that are committed to use cases such as digital currencies and stablecoin payment systems.

Amit Rajpal, CEO of Marshall Wace Asia Limited, Overview The company’s digital asset investment paper pointed out that the focus is on projects that redefine financial services, especially in the field of payments. According to Rajpal, digital finance is already changing the architecture of the underlying financial system.

Even before reports of its cryptocurrency-focused portfolio appeared, Marshall Wace was already involved in the field of digital assets.Back in May, hedge funds participate Dollar coin (USDC) Stablecoin issuer Circle completes $440 million financing.

Marshall Wace is just the latest list of more and more hedge funds and other institutional investors exploring crypto investment options. In April, Brevan Howard, a UK-based asset management company, raised $84 million in crypto investment funds.

speak Cointelegraph China In early July, Cornell University professor and Avalanche founder Emin Gün Sirer stated that the current market downturn has not curbed the enthusiasm of institutional investors for cryptocurrency exposure. According to Sirer, the legitimacy of encryption as an asset class is “unquestionable”, noting that:

“I have been in contact with retirement funds, not hedge funds, but retirement funds. A very different piece. The moving speed is much slower, but they may control 10 times more U.S. dollars, and they are slowly entering the crypto space. .”

Joe DiPasquale, CEO of crypto hedge fund BitBull Capital, also responded to Sirer’s comments, telling Cointelegraph, “Institutional investors remain interested and continue to build positions at key support levels.”

“Of course, the market hype has weakened, but these downturns have always been a good time for long-term entry,” BitBull Capital CEO added.

Nickel Digital Asset Management is a $200 million crypto hedge fund, and its spokesperson also provided some insights into the emerging strategies of institutional participants in the current cryptocurrency range trading. In a conversation with Cointelegraph, a representative of Nickel Digital said: “We see the active and continuous participation of the entire institutional community, including (but not limited to) pension funds, foundations, endowment funds, and hedge fund funds,” added:

“The recent volatility has proven to be an opportunity for certain trading strategies (such as market neutral arbitrage), and it is also detrimental to other trading strategies (beta exposure to underlying crypto assets). In fact, it immediately created a greater impact on volatility. Low demand for defensive funds. Investment objectives, scale and risk tolerance are key factors in evaluating any investment opportunity, especially in the crypto space.”

indeed, Nickel Digital recently rebalanced its cash position Due to the current market decline, the company called this move “financial discipline.” According to Anatoly Crachilov, the CEO of the fund, Nickel Digital is keeping its investment powder dry in the hope of future returns on the parabolic price increase in the crypto market.

Big money players welcome more crypto regulation

As more and more institutional participants get involved in cryptocurrency, stakeholders say that asset management companies are not worried about regulatory risks. In fact, most of the attention of financial regulators seems to be focused on the protection of retail investors.

At the same time, banks and other regulated entities appear to have obtained clearer authorization to interact with digital assets from regulators. A Nickel Digital spokesperson told Cointelegraph while commenting on the advantages of passing clear cryptocurrency regulations:

“We accept regulation because we feel that regulation brings clarity, and clarity brings broader market participation. Encryption has been regulated in the United States for many years, and recent changes in Germany may release billions of dollars in the crypto sector. “

In early July, the German authorities by A landmark ruling that allows institutional funds to allocate up to 20% of their managed assets to cryptocurrencies. Although the German Federal Financial Supervisory Authority issued a warning about the dangers of speculative investment, it still took this action.

Germany’s new law may cause investments worth up to 415 billion U.S. dollars to flow into the crypto space. Germany’s “Fund Distribution Law” is also on top of previous rulings, which put security tokens on the same status as other regulated investment vehicles in the country.

DiPasquale dispelled any concerns about the negative impact of regulatory review on institutional crypto participation. He told Cointelegraph, “There are always regulatory concerns in the crypto field, but there is an incentive for compliance, which may lead to a more lenient attitude in the future.”

The bulls will return in the fall

If the current cryptocurrency downturn provides high-quality investment opportunities for hedge funds and other institutional investors, then this strategy is likely to rely on expectations of future market rebounds.As previously reported by Cointelegraph, Sirer predicts lateral accumulation Will dominate the price trend of cryptocurrencies In the summer months.

In fact, since falling by more than 50%, Bitcoin has been fluctuating in the price range of $32,000 to $36,000. Either way, Bitcoin lacks major breakthroughs, which almost means repeating small declines and skyrocketing increases in the entire cryptocurrency market.

However, Sirer stated that he expects to return to an upward parabolic price trajectory in the fourth quarter. According to the founder of Avalanche, the expected recovery should begin in October or November.

“I am very excited about what is going to happen because I know people are very interested in institutions, retail and this new technology that is ready to change the world. […] We are in the early stages of a large-scale movement to reorganize the entire financial infrastructure. “

“The bear market is actually very suitable for getting the job done. The financial transformation will not stop because we have encountered relative price adjustments,” Sirer added Cointelegraph ChinaThe Cornell University professor also stated that serious stakeholders are using the current period as a time for integration and growth.

related: Avalanche founder Emin Gün Sirer is “very optimistic” about the prospects of the cryptocurrency market

Like Sirer and Marshall Wace’s Rajpal, people are increasingly believing that the cryptocurrency and blockchain space is disrupting the global financial system, so institutional entities have become interested. Even in retail, regulated institutions such as banks are increasingly keen to provide services related to cryptocurrencies.

Millions of dollars are flowing into the vaults of exchanges such as Coinbase every day, and companies such as NYDIG said that Bank of America is keen to take action and begin to provide bitcoin trading services to account holders. Therefore, the company recently announced a series of partnerships that will allow encrypted transactions from U.S. customer bank accounts.

BitBull’s DiPasquale also mentioned the possibility of a return to the bull market in 2021, but provided a date close to winter, and added: “We may see a return in 2021, yes, but it may not be until December or early next year. To see parabolic gains.” However, DiPasquale predicts that Bitcoin will be trading at a price higher than $50,000 at the end of the year.