Most people have heard of mutual funds and ETFs yet few investors are aware that cryptocurrency funds are now available. This new investment vehicle is somewhat similar to a hedge fund. The primary difference is crypto funds are comprised of digital assets.
If you are an investor or considering investing your wealth, cryptocurrency funds are worth your consideration. Investors far and wide are evaluating crypto funds simply because they provide a way to diversify an investment portfolio. So don’t be so quick to gamble all your digital currency at Bitcoin casinos. Consider diversifying with a crypto fund and you just might emerge a big winner.
The Basics of Cryptocurrency Funds
Cryptocurrency funds are headed by one or several managers. Investors buy into crypto funds with the hope of profiting from the appreciation of the crypto holdings. Crypto Fund Research reports half of crypto funds are venture capital funds. The remainder of crypto funds are primarily hedge funds. Crypto fund managers use a variety of strategies to bolster the value of their investments.
As an example, managers of crypto funds commonly employ the strategy of long/short equity. This approach requires a review of the assets to determine which are overvalued and undervalued. Short and long positions are then implemented accordingly. If the fund manager’s analysis is accurate, the portfolio will increase in value.
Another common crypto fund management strategy is referred to as market neutral. The market neutral approach attempts to balance the short and long positions for a net zero exposure to the market. However, lower risk typically generates steady yet minimal returns.
Let the Crypto Experts do the Research for You
Most crypto enthusiasts are aware that there are seemingly countless digital coins available for purchase. There is considerable appeal to simply investing in a crypto fund and letting the fund manager do all the work. Examples of crypto funds include Pantera Capital, Galaxy Digital and the Digital Currency Group. Each of these groups is narrowly focused on investing cryptocurrencies.
An Alternative Approach: Tokenbox
Tokenbox appeals to retail investors looking to make money from crypto. Tokenbox servs as a general wallet while also empowering crypto enthusiasts to tokenize a portfolio and benefit from tokens in others’ portfolios.
In short, Tokenbox is an easy way to get into a new crypto fund or obtain a piece of another. These tokens are linked to winning portfolios with the value fully tied to the fund performance. The best part is there is no need to plunk down thousands or tens of thousands of dollars. Rather, Tokenbox is more akin to buying one cryptocurrency, making it quite affordable for everyday people.
Crypto Funds Will Only get More Popular
If you are not yet invested in a crypto fund, do not assume you have missed your opportunity. Crypto funds are fairly new. According to PricewaterhouseCoopers, the aggregate value of crypto funds in assets under management increased from $1 billion in ’18 to $2 billion in ’19. Though the median return on crypto fund investments decreased between ’18 and ’19, it still beat out most conventional hedge funds.