Blockchain technology and cryptocurrencies have become a prime target for forward-leaning hedge funds, venture capitalists, and private equity firms in 2018 as the crypto ecosystem rapidly matures. The total number of cryptocurrency funds has skyrocketed over the first half of 2018, surging to over 225 from just 58 at the end of 2017. While crypto funds may have experienced a rocky start this year, with nine funds shutting down amidst a 48% nosedive in net returns across all cryptocurrency programs in the Barclays database, crypto funds have experienced a strong rebound with a 48% positive shift from April onwards.
The rapidly evolving cryptocurrency market is gradually merging with the existing global financial system, with more complex financial instruments and products becoming available to market professionals. Data shared by fintech analysis firm Autonomous NEXT with CNBC demonstrates that crypto funds currently manage more than $5 billion in assets, contributing significantly to the entire blockchain ecosystem.
Hedge funds account for roughly 65% of all cryptocurrency funds, with a further 32% driven by venture capital. Private equity firms hold just 3% of the total assets managed by crypto funds. There are now hundreds of venture capital firms investing in promising blockchain platforms before token sales, investing in equity stakes before crowdsales in order to profit from proceeds later. Venture capital interest in the cryptocurrency sector has increased dramatically over the last year. The explosive growth of the initial coin offering model and the vast amounts of capital captured by token offerings caught the attention of venture capitalists, who are beginning to invest in the model at the pre-ICO stage.