HEDGE FUNDS EXPANDING REACH INTO DIGITAL CURRENCIES

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Brevan Howard Asset Management and Tudor Investment Corp. are broadening their work in cryptocurrencies. 

Brevan Howard’s crypto fund, launched in January, soon will open itself to outside investors, The Wall Street Journal reported. 

In addition to betting on price directions, the fund will arbitrage different cryptos against each other and invest in blockchain technology, the WSJ said.  

The firm created a crypto division last September and now has 12 portfolio managers and $250 million under management, according to the WSJ 

Tudor has been buying crypto to hedge against inflation, persons familiar told the WSJ 

“More funds see crypto as a fifth asset class,” in addition to bonds, commodities, currencies, and stocks, Robert Bogucki, co-head of global trading at Galaxy Digital Holdings, told the WSJ 

Crypto “is big enough now,” he said.  

That means trading volumes have grown large enough that hedge funds can buy and sell without skewing the market with single transactions. 

“The crypto universe is now liquid and large enough to be tradable,” Michael Botlo, former chief of the Quantbot technical trading fund, confirmed to the WSJ 

“Hedge funds are seeing their own investors demand that the firms get involved,” he said.  

Though large, the crypto market is young and still shows inefficiencies that enable large firms with up-to-the-minute information to bag solid profits, the WSJ noted.  

The market also is rife with individuals, dabblers, and inexperienced traders who often lack the data, time, and skills to react to market moves.   

Still, not all hedge funds are wading in; some still see crypto as an unreliable place to store value or as a reliable hedge, since cryptos’ prices now move more closely in tandem with those of stocks.   

Paul Singer, founder of Elliott Management Corp., has been vocal about his skepticism. Citadel Securities founder Ken Griffin still harbors doubts but, bowing to the market, Citadel might open a crypto market for clients, he told the WSJ 

TREND FORECAST: Digital currencies continue to work their way into the economic mainstream and will become a respectable asset class to invest in and trade by the middle of this decade, especially as government regulators structure a framework for oversight that ensures investors’ safety.  

We have documented cryptos progress toward acceptance in articles such as “El Salvador Recognizes Bitcoin as Cash” (15 Jun 2021), “State Street Launches Digital Currency Unit” (15 Jun 2021), “Switzerland Approves Digital Stock Exchange” (14 Sep 2021), “Cryptos Go Mainstream” (21 Sep 2021), and “SEC Push to Regulate Crypto” (7 Dec 2021), among others.


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