Investors in the cryptocurrency space didn’t have much to cheer about at the start of 2018, with the No. 1 digital currency, bitcoin, falling more than 25% in January, putting a dent in the returns of some hedge funds.
According to data provided by HFR, hedge funds investing in the cryptocurrency space lost nearly 10% in January as prices continued to swing violently, seeing daily ranges of more than 15% on multiple occasions. At the start of 2018, a single bitcoin
was transacted at $13,860, and finished January trading below $11,000, posting a monthly decline of 24.8%, according to data from CoinDesk. That after having changed hands in December for more than $20,000.
Volatile cryptocurrency and blockchain funds fell in January as cryptocurrencies fell sharply, with the HFR Blockchain Index falling 9.2%, the HFR report said.
Despite January’s losses, it’s been a stellar run. January was the first monthly loss for hedge funds in the crypto space since September 2017, and just the second monthly decline since August 2016, HFR data showed. Furthermore, the HFR Blockchain Composite Index rose 2,798% in 2017, and the HFR Cryptocurrency Index added 2,922%.
The recent decline in bitcoin
and other cryptocurrency prices comes amid growing skepticism in the asset class. On Wednesday, Goldman Sachs analyst Steve Strongin called it probable that most cryptocurrencies would head to zero in the next five to 10 years. Adding to the negative outlook was “Dr. Doom” himself, Nouriel Roubini. The economist took to Twitter to share his opinion, calling bitcoin a “crypto-scam” and declaring even its price headed to zero.
Since dipping below $6,000 on Tuesday, the price of a single bitcoin has risen more than 30% inside of 48 hours, much to the delight of the perpetual bitcoin bulls Tyler and Cameron Winklevoss. Speaking on CNBC on Wednesday, the twins said bitcoin was set to challenge gold as the No. 1 store of wealth, and predicted the price of a single bitcoin will be 40 times its current worth, which was $8,200 at the time of the interview.
Either way, expect hedge-fund returns to remain volatile. The distance between bulls and bears is growing, and, as government officials and central bankers begin to weigh in, more volatile action in cryptocurrency looks likely.
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