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.

Top-Tier Crypto Exchanges Now Represent Less Than 30% of Total Volume, Report Shows

The aggregate trading volume of top-tier cryptocurrency exchanges has dropped 26.26% last month, while the trading volume of lower-tier cryptocurrency exchanges dropped less than 20%.

According to the CryptoCompare December 2019 Exchange Review, the trading volume of cryptocurrency exchanges that, according to CryptoCompare’s Exchange Benchmark tool, are rated AA-B dropped to represent only around 27.4% of the total market.

This means the market share of lower-tier exchanges, rated C-F, increased, even though these platforms saw their trading volumes drop by 19.9%. As CryptoGlobe reported, CryptoCompare’s November report showed the volume of top-tier exchanges dropped nearly 7% that month, while that of lower-tier platforms rose 3.7%.

In November, top-tier cryptocurrency exchanges represented 31.4% of the total market, while in October they account for 33% of the trading volume, while lower-tier exchanges only had 67% of the market share.

trading volume by tier of exchangeSource: CryptoCompare

CryptoCompare’s Exchange Review also covers cryptocurrency derivatives, pricing data, and more. It notes that Binance has become a major derivatives player since it launched its futures products in September, with its BTC perpetual future now being the third most traded product by total monthly volume, at $29.4 billion.

Both Binance and BitMEX represented the majority of the Ethereum perpetual futures market, with 44% and 23% of the volume respectively. OKEx was, however, the top derivatives exchanges in USD terms, trading a total of $99.6 billion in December.

As for regulated bitcoin derivatives products, the CME is still dominating the market, even though total volumes fell 6.2% to $3.96 billion.  Grayscale’s bitcoin trust product, on the other hand, fell 19.6% to $394.72 million.

The report also addresses trans-fee mining cryptocurrency exchanges, noting the top TFM exchange, Bitforex, saw its trading volume rise 5.37% in December, while the second-largest TFM exchange, CoinBene, saw its volume drop nearly 12%.

Decentralized exchanges still only represent 0.01% of the total trading volume in the cryptocurrency space, according to the report, with IDEX being the largest one, trading $8 million in December.

Featured image by Lukas from Pexels.