Crypto Funds Stumble: Holding Bitcoin Outperforms by 68.8%

As stated by 21e6 Capital AG, throughout past bull markets, cryptocurrency funds generally surpassed Bitcoin (BTC) in price appreciation. However, in this year’s performance, these funds stumbled due to excess cash reserves and cautious investment strategies.

In the first half (H1) of 2023, a traditional Bitcoin buying and holding strategy, commonly referred to as ‘hodl,’ superseded most crypto funds by a substantial 68.8%.

Investment advisor 21e6 Capital AG, based in Switzerland, provided data suggesting that cryptocurrency funds saw average returns of 15.2% during H1 2023. This fell significantly short compared to the roughly 84% gain in BTC.

Maximilian Bruckner, the head of marketing at 21e6 Capital AG, highlighted in the firm’s report that during previous bull markets, crypto funds had typically surpassed Bitcoin’s performance.

Bruckner pinned the underperformance of cryptocurrency funds in 2023 on difficult market conditions and an excessive cash reserve accumulated by these funds towards the end of 2022.

The report noted that the collapse of FTX and other cryptocurrency projects in 2022 led to many funds pulling back risk and establishing cash buffers. Consequently, these funds missed out on the significant price rally experienced by BTC in H1 2023.

The report further mentions the lingering sentiment from the end of 2022, which led to larger cash positions than usual for many funds. Moreover, the majority of major altcoins also lagged behind Bitcoin, making it a challenging environment for the funds.

As of the report’s writing, BTC is priced approximately at $29,000, grappling to sustain a level above $30,000. This threshold has only been briefly exceeded a few times in 2023.

Still, the current prices signify a price appreciation of about 75% for the digital asset since the start of the year, based on CoinGecko data.

Looking ahead, the report emphasizes the firm’s attention to identifying which exchanges will emerge as leading futures providers. Also, the state of funding rates in the cryptocurrency futures market and the capability of quantitative funds to identify trends will be central to their market analysis.

The report ultimately suggests a slight improvement in investor sentiment throughout H1 2023. This implies that some funds might begin investing more cash into the cryptocurrency sector shortly.

Nevertheless, it is important to note that the report also states that current data on fund inflows and outflows suggests that a complete sentiment recovery has yet to occur.

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