Crypto is The Fastest Growing Segment of The Hedge Fund Industry

  • Crypto is the fastest growing segment of the hedge fund industry
  • Crypto Fund Research reveals top 50 VC crypto investment trends
  • $637.7m already invested so far this year, passing the total 2017 figure of $496.7m

Despite the widespread sense of regulatory confusion and cryptocurrencies’ enormous value losses in recent months, investment from venture capital (VC) firms and hedge funds has grown significantly.

It is widely believed that regulatory clarity will have a snowball effect on institutional investors, however, the sector has already seen the pace of investments pick up sharply this year. Data from Crypto Fund Research shows as of June 15, there were 216 investments in 2018, versus 236 for all of last year and the amount invested so far this year, $637.7m, has already surpassed the 2017 total of $496.7m.

Crypto Fund Research, a cryptocurrency and blockchain research group formed in 2017, has developed the data from various sources and its own research.

The firm ranks each VC using four separate criteria: overall investment activity, capital outlay, blockchain investment experience (time since first investment) and recent activity (blockchain investments made in the past 12 months).

Its report shows Digital Currency Group leads the list of the Top 50 Blockchain VCs. The company came out top in the first iteration of its top 50 blockchain venture capital firms in the world. The New York-based Digital Currency Group, which invests exclusively in crypto and blockchain companies, has made 58 investments total and 15 over the past 12 months. It has invested $78m overall.

Pantera Capital, based in Menlo Park, Calif., came second, and Blockchain Capital, of San Francisco, came in third. Andreessen Horowitz, which recently announced a $300m crypto fund was fourth on the list.

“The four criteria we used reflects not only total investment but also how long they’ve been investing in blockchain and how active they are today, not just a year or three ago,” Josh Gnaizda CEO of CryptoFundResearch says:

The industry is changing rapidly. So what’s most accurate today won’t be as correct next month. We do, however, intend to keep this page updated frequently. That’s why we really wanted to establish criteria that can be replicated.

Josh Gnaizda

The company hopes its data will provide clarity in an area where there hasn’t been a lot of reliable public data.

38% of Crypto Exchanges Interact With High-Risk Entities in 25% or More of Their Transactions

Leading cryptoasset data provider CryptoCompare has published an updated version of its cryptocurrency Exchange Benchmark. The report details that 38% of crypto exchanges interact with high-risk entities in 25% or more of their transactions.

According to CryptoCompare’s Exchange Benchmark, interactions with high-risk entities are considered when the cryptoasset data provider is raking exchanges. These interactions are measured according to CipherTrace’s Interaction Risk Score, which profiles transactional risk by “deanonymizing risky entities and illicit activities to identify criminal sources of funds and money laundering exposure.”

CryptoCompare then scores exchanges according to the percentage of transactions conducted with entities deemed high-risk. These include criminals, darknet markets and vendors, gambling projects, malware operators, cryptocurrency mixers, ransomware operators, and OFAC sanctions addresses.

The benchmark details that addresses with up to 25% of transactions conducted with these entities receive some points, but those above said mark receive none. Notably, 38% of cryptoasset exchanges were above it.

Data shared in the report detailed that Top-Tier cryptoasset exchanges, those graded AA to B in the report, interact less with these entities, while Lower-Tier exchanges, those rated C-E, interacted more. While both AA-related exchanges, Coinbase and Gemini, had no interactions with high-risk entities, some of the exchanges with A, BB, and B ratings did.

As CryptoGlobe reported, the Exchange Benchmark also revealed Top-Tier exchanges are gaining market share against Lower-Tier exchanges. It details that top-tier exchanges accounted for 32% of the global volumes in Q4 2019, while in the first quarter of this year they accounted for 36%.

In the second quarter of 2020, the Top-Tier exchanges already accounted for 40% of the global trading volume. In June these exchanges got to a 46% market share. Lower-Tier Exchanges, have seen their share of the space’s total trading volume drop from 68% to 60% in the last three quarters.

Featured image via Pixabay.