Crypto Funds Have Trouble Surviving the Volatility

Volatility in cryptocurrency prices forced some hedge funds to close their doors after the March sell-off; those that survived saw the sector bounce back, in particular bitcoin which is now up 36 percent for the year; cryptocurrencies have always been volatile and have offered investors a chance at big returns, along with big risk; unlike some of the other markets the government will not be stepping in to act as a backstop for cryptocurrencies; the March sell-off was a surprise to many in the market and caused over leveraged funds to collapse; “The speed and depth of the bitcoin sell-off wasn’t what we were expecting,” said Dan Morehead, Founder of California-based Pantera Capital, to the FT. “Some futures exchanges offer almost insane amounts of leverage,” Mr Morehead said. “Bitcoin is such high-octane stuff that putting on any leverage is unnecessary.”; with interest rates near zero for the foreseeable future the market does become appealing for investors willing to take the risk; “Cryptocurrencies, particularly bitcoin, are an attractive portfolio hedge against currency debasement and inflation,” billionaire investor Mike Novogratz, Founder of Galaxy Digital, told the FT. Financial Times

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