Reality Shares Set To Launch $100 Million Crypto Hedge Fund, After Its First Ever Blockchain ETF

Omar Faridi
  • Asset management firm Reality Shares is planning to launch a $100 million crypto hedge fund.
  • The investment firm's new crypto hedge fund announcement follows the successful launch of its blockchain-ETF in January.

Reality Shares, an asset management firm and blockchain exchange-traded fund (ETF) issuer, is reportedly planning to launch a $100 million crypto hedge fund.

Notably, soon after the small asset manager introduced its blockchain-ETF (Reality Shares Nasdaq NexGen Economy China ETF) in January, the investment company’s assets under management increased by over $100 million.

Over 100 Crypto Hedge Funds In 2018

According to a source working closely with the privately owned firm, $25 million has been committed so far to the crypto hedge fund, which is capped at $100 million. Reality Shares’ fund preparations come at a time when over 100 cryptocurrency hedge funds are expected to be launched in 2018, as noted by Crypto Fund Research.

Despite the crypto market shedding over $600 billion since January, it appears that the capital pouring into the volatile digital currency ecosystem is still on track to match, or even exceed, the 150+ crypto hedge funds launched last year.

Additionally, Business Insider noted that California-based Reality Shares’ crypto hedge fund will be “a mix of arbitrage, venture, and directional strategies” and it will join a market of over 366 crypto-asset funds. Moreover, the $100 million investment is also part of the asset manager’s focused expansion efforts into the crypto market.

Only 28 Crypto Hedge Funds Over $100 Million

While it might seem that there is considerable investor interest, the crypto industry is still “really struggling” with capital, as pointed by blockchain investor Meltem Demirors. Notably, a closer look at the numbers by Crypto Fund Research indicates that only 28 crypto hedge funds currently have over $100 million under management.

But when looking at the bigger picture, the entire market capitalization of the crypto market was only around $20 billion in January 2017. Since then, the total market cap of all cryptocurrencies has increased by 10x to currently over $200 billion. However, many market watchers such as Goldman Sachs’ investment advisors have said that cryptocurrencies “will not retain value”, as its recent economic-outlook report tended to focus more on the significant drop in crypto prices, after reaching all-time highs in December 2017.

Wall Street Firms Getting Serious About Crypto

Interestingly, even though Goldman Sachs has been critical of digital currencies, it is still reportedly planning to launch a crypto trading desk. Meanwhile, Intercontinental Exchange (ICE) also recently announced that it will be launching its own digital asset trading platform called Bakkt.

These developments will be encouraging to the crypto-economy at a time where crypto-assets are sliding across the board, as it suggests that traditional financial market institutions are beginning to take the industry more seriously.

Four Exchanges Represent 96% of Crypto Derivatives Trading, Report Shows

Four exchanges represent 96% of the total crypto derivatives trading volume. According to figures from CryptoCompare’s December 2019 Exchange Report, OKEx is the leading exchange in crypto derivatives trading.

The report shows that during December, OKEx registered an impressive $3.32 billion in daily trading volume. This represents 35.8% of the total market share in crypto derivatives.

Following closely behind is Huobi, with $2.7 billion in daily trading volume and a 29.16% market share. Further behind is BitMEX, with a volume of $1.9 billion and 19.7% market share, and Binance, with a volume of $797 million and 11.4% market share.

Out of all the big exchanges listed above, OKEx was the only one that saw its volume go up. Trading a total of $99.6 billion in crypto derivatives in December, OKEx registered a growth of 11% in comparison to the previous month. Huobi registered $76.5 billion but showed a 14.5% decrease in volume from November, and BitMEX accounted for $51.1 billion and was also down 28.8%.

OKEx was also the third biggest exchange in Ethereum perpetual futures. Following behind it was BitMEX (44%) and Binance (23.2%), OKEx controls roughly 20.8% of that market with a $1.7 billion in trading volume.

Market Leader in Crypto Derivatives

Although BitMEX is leading in the ETH and BTC perpetual futures, OKEx is the top exchange when it comes to crypto derivatives. Founded in 2017 and based out of Malta, OKEx is one of the biggest cryptocurrencies in the world. In fact, in May 2018 OKEx was the world's largest cryptocurrency exchange by reported turnover.

Having launched its own native token in early 2018, the OKB token, the OKEx team is actively working to improve its platform and services. OKEx has its own blockchain in the final stages of testing, OKChain, and has future plans to release a decentralized exchange, OKDEx. Both these products will expand the OKEx ecosystem and add features to its OKB token.

Despite these developments, OKEx continues to focus and give special attention to the derivatives market. In recent months, the company released a data analytics platform for derivatives trading, Bitcoin futures contracts margined with Tether (USDT), and Bitcoin options trading that are scheduled for public launch this month of January.

Despite the success, many in the industry have questioned OKEx’s trading numbers, accusing the company of wash trading, fake volumes and market manipulations.

Growing Popularity

The crypto derivatives market has shown fierce growth since the Chicago Board Options Exchange (CBOE) started trading bitcoin futures back in 2017. Crypto derivatives have grown throughout 2019, both in numbers and in product variety, and most exchanges who adopted such types of products have registered unprecedented growth.

Despite their bad reputation, commonly pointed as the cause behind the fall of America’s former energy and commodities firm Enron, derivatives have brought growth and attention from the general public to the crypto industry. And this trend seems to be ongoing, as just two weeks ago the Chicago Mercantile Exchange (CME) released the long-awaited Bitcoin options, sparking tremendous interest from investors and fueling the busiest crypto derivatives trading day of 2020.

The launch of Bitcoin futures by the CBOE and the CME caused significant price spikes, and promoted the interest of the general public on cryptocurrencies, opening it to a wider audience. It is possible futures will make the crypto market more stable, as in traditional finance it has been shown to make the underlying asset balance out price fluctuations.