We’re often asked what are the differences between US and Australian based cryptocurrency hedge funds and whether the US based funds provide a better opportunity for investment. Although we see value in Australian based cryptocurrency hedge funds there are certain advantages in choosing the more experienced and evolved funds based in the US. Outlined below we discuss a few points in relation to the benefits of investing in US based crypto funds.
Experience in Market
The first and most obvious point is experience and time in the market. Australian based cryptocurrency hedge funds only starting appearing towards the end of 2017 while in the US some funds have been in existence since 2015. As a result many US based crypto funds have been through boom and busts in regard to the crypto market and have developed strategies around reducing risk and increasing returns.
Proximity to Crypto Assets
Many crypto assets are based in the US in close proximity to where these crypto hedge funds are based. This means these hedge funds can easily meet with crypto asset founders, assess the potential of these assets and continue to work with the assets once they deploy investments across them. Some crypto hedge funds in the US approach their investment thesis similar to a VC fund where they have a hands on approach to ICOs or crypto assets they have deployed capital across.
Access to information and insights
Many of the global cryptocurrency conferences and events are based in the US. So the US based crypto hedge funds can attend a plethora of these events and gain face to face access to important market and specific asset information. They also can easily expand their networks through these events and conferences broadening their investment opportunities.
Larger Teams and Assets Under Management
Due to the time in market and size of the US based investment market, a cryptocurrency hedge funds based in the US have anywhere from USD10 million to USD200 million worth of assets under management. This allows these hedge funds to have access to better deals along with have larger and more qualified staff and advisors then those smaller an newer Australian based funds.
Sophisticated Custodian Processes
Security of physical crypto assets is paramount and due to the experience, assets under management and resources available US based cryptocurrency hedge funds have much more sophisticated internal and external custodian processes for storing and securing cryptocurrency currencies.
Competition Driving Innovation and Differentiation
There are now over 200 cryptocurrency hedge funds in the US compared to less than 5 in Australia. Each of these 200 funds are attempting to not only outperform one another but also forge their own unique service proposition. This has led to crypto funds specialising in niche areas in the market ie Long Funds, Short Funds, Quantitative Based Funds, ICO Funds, ICO Long Funds, VC Funds, Index Funds, Bitcoin Funds and Mining Funds. This results in a more defined investment strategy and allows investors to focus on investments in particular areas of the digital asset class. All of the Australian based crypto funds have had a very broad investment strategy.
Cryptochain Capital see value in Australian based crypto hedge funds however at this point in time we see better value and return for investors through investments in US based cryptocurrency funds.