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Why Bitcoin Should Have Been a Part of The Top 5 Hedge Funds

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Luke Whelan | Feb 16, 2020 | 17:00

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Why Bitcoin Should Have Been a Part of The Top 5 Hedge Funds

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Luke Whelan | Feb 16, 2020 | 17:00


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Five hedge fund managers. Each earning more than one billion dollars. But they could have earned more with Bitcoin.


According to the latest research by Bloomberg, the top 5 hedge fund managers are estimated to have earned over $1 billion each. Among the top 10 investments contributing to the success of these 5 were tech stocks such as Facebook Ltd and Alibaba.

While it was a successful year for these fund managers, their results could have been more impressive had they invested in cryptocurrency.

Based on Bitcoin’s results in 2019, which regularly beat the S&P index, had they made steps to integrate the cryptocurrency into their portfolios, there’s a strong chance that these hedge funds could have majorly increased their returns.

Who were the top 5 fund managers?

  • Coleman Chase – Tiger Global Management
  • Steve Cohen – Point72 Asset Management
  • Ken Griffin – Citadel
  • Jim Simmons – Renaissance technology
  • Chris Hohn – TCI Fund Management

Bitcoin Beat The Top 5 Fund Managers

By the end of 2019, Bitcoin vastly outperformed the S&P index’s 29% returns. It also beat all the funds included in the portfolios of each of the top 5 hedge fund managers.

Case in point:

While Coleman Chase’s main fund returned 33% by the end of the year, the Bitcoin price returned over 85% to people who bought the coin at the start of 2019.

As a result, the replacement of poorer performing assets in the portfolio with Bitcoin or Grayscale Bitcoin Trust Stocks would have upped each of the top 5 hedge fund managers’ returns.

A Bright Future for Funds Containing Bitcoin

Just one and a half months into 2020, Bitcoin has already outperformed the entirety of the S&P’s gains from 2019.

At the start of the year Bitcoin traded at $7,250. Now, one bitcoin costs over $10,000.

These are monumental gains for the cryptocurrency, and if the asset continues to behave this bullish it could mean similarly huge results for hedge funds investing in the cryptocurrency if they decide to do this.

Already, crypto asset managers, such as the Grayscale Bitcoin Trust, are reaping in the benefits of the Bitcoin market trends.

Greyscale — who had a record-breaking year in 2019 (raising over $180 million) —  are continuing to experience strong upward trends in 2020.

However, Bitcoin-related investments are yet to take up a large asset allocation for traditional hedge funds.

After hedge fund managers compare their gains with the results of Bitcoin and funds with large Bitcoin allocation, perhaps we will see greater investment by hedge funds into the coin.

Who knows, maybe we can expect to see even larger results for the top 5 managers this time next year resulting from greater Bitcoin investment.

Professionals: ‘Hedge Funds Need To Enter This Bullish Market’

According to professional crypto asset managers, investing in Bitcoin would be a strong choice for hedge funds, as the market is giving off plenty of bullish signs.

Benjamin Zennou — Managing Partner at Enigma Securities, which is a crypto liquidity provider and blockchain advisory firm, expects asset allocations for Bitcoin to increase over time as the cryptocurrency is perceived as less risky.

Evidence of that change, he says, is the fact “Open interest on CME’s BTC futures just hit its highest level for open interest on record. Importantly, ‘Leveraged funds’ have always been a significant majority of that according to the CFTC (commodity futures trading commission).”

Leveraged funds are funds that use financial debt to amplify returns. An increase in leveraged funds being used to pay for Bitcoin could suggest that fund managers have more trust in Bitcoin since using leveraged funds increases risk.

Explaining the Trends

Benjamin’s analyst, Joseph Edwards attributes three things to the growing interest in Bitcoin: increased liquidity, regulated investing infrastructure and a track record of performance that “prove it has some level of baseline value”.

Each of these trends helps change the image of Bitcoin as a “very difficult ride” for investors — as Alistair Cotton described it, into a stable, trust-worthy investment that should receive a larger asset allocation. All of this makes it more likely that traditional hedge funds to adopt it.

Should BTC be a part of traditional hedge funds? Let us know what you think in the comments below!


Image via Shutterstock


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