The digital currency industry attracts investors thanks to the promise of high and fast income. The income that’s only possible if this new industry is actively growing. But not everybody can spare time and effort to thoroughly study the new market. After all, investing in it is significantly different from investing in a stock market. That’s where cryptocurrency funds come in.
Table of Contents
The thing is you can invest in cryptocurrency by transferring your assets into trust management by professionals. This is exactly why cryptocurrency funds exist. And this is what we are going to talk about here.
New financial technologies became the basis for the emergence of investment funds that manage cryptocurrency capital. These funds use various strategies and their operating styles are different. However, each company is of great interest. You as an investor can make the right choice by carefully studying the options, capital stock, managing strategies, and rates. As a result, you will be able to get to a whole new level of income and manage your funds effectively.
What is a Crypto Fund
A Crypto investment fund is a company that offers digital currency trading and investment services to private investors. Basically, crypto funds are just like regular investment funds but their activities are limited to the cryptocurrency market.
These companies offer potential investors cooperation that implies that professionals will take care of their investment funds. In other words, cryptocurrency market experts will conduct digital currency exchange transactions. In their expert opinion and based on thorough analysis, these transactions can generate profits that will go to the investors’ wallets. Certainly, this comes at a price; all crypto funds charge a commission fee. Some of them take a percentage of the profits and some take the commission off the investment capital.
When someone decides to invest in a crypto fund, they transfer their funds for trust and the company undertakes to manage these funds to multiply them and to pay all profits in a timely manner. The responsibility of these companies include:
- building up a client’s investment portfolio competently;
- searching for potential income-earning opportunities;
- choosing managing strategies;
- investment analysis;
- risk assessment.
All existing cryptocurrency funds fall into two categories. There are those that invest solely in ICO startups. Their profitability is largely defined by the company’s product popularity growth. And there are crypto hedge funds that only engage in cryptocurrency trading and that’s precisely what defined their profitability.
How Cryptocurrency Funds Work
The Crypto fund’s primary activity is the sale of crypto tokens. If an investor buys a share of tokens from it and their price goes up after this, the investor gains actual profit. After this, they can either trade the more expensive tokens for cash or leave them in the fund hoping their price will increase some more. The rise in a token’s price depends on the fund’s capitalization: when it increases, so does the price of tokens.
To make the relationship between the fun and an investor legal, the two parties sign an agreement, in which they specify the percentage of their profits and all issues regarding the risk of capital loss.
Each crypto fund has its own strategy for cooperation with investors but normally they distribute investors’ funds in three main categories:
- Buying viable tokens of reliable and profitable cryptocurrencies.
- Buying viable altcoins.
- Buying cryptocurrencies this particular fund finds underappreciated.
As you probably understand, the level of competency of fund experts plays a significant role in all three cases. Considering the high volatility of the cryptocurrency markets, these experts spend a significant part of their working time to monitor the dynamics of the current rates. Access to insider information from cryptocurrency developers and stock market professionals provide a great advantage as well.
In effect, the funds usually determine one or two promising projects and invest the majority of funds in them. On top of that, they also find newly viable (and old underappreciated) crypto projects, in which they invest the remaining funds. The tokens of crypto projects that, in the fund expert’s opinion, have reached their maximum rates, get re-sold.
Types of Crypto Hedge Fund
Cryptocurrency investment funds usually fall into two categories, hedge funds, and unit investment funds. Crypto hedge funds manage investors’ assets and receive a certain commission percentage for this. The majority of these companies do not provide the option of withdrawal of funds before the dates specified in the agreement.
The classification of cryptocurrency hedge funds relies on investment strategies. These strategies can be roughly divided into two categories:
- Ones chosen by managers (discretionary/qualitative).
- Ones chosen by computers (systematic/quantitative).
According to the commonly adopted categorization and based on the said categories, experts outline the following types of hedge fund strategies:
- Global macro strategy. Global macro strategies analyze macroeconomic events that can affect a current trend: make it keep its direction and dynamics or define a turning point. Economy trends emerging both on global and local markets, political aspects, climatic factors are some of such trends.
- Directional strategy. The directional strategy’s main goal is to predict key events on the market and make a maximum profit off of it. It sometimes intersects with the global macro strategy.
- Relative value strategy (arbitrage). Relative value strategy is about cashing in on differences in value for the same offers on different markets. In short, in a situation when the prices for the same asset differ significantly, traders take advantage of it to gain profit.
- Multi-manager strategy. This is a complex construct where the crypto hedge funds themselves are presented as assets. This strategy involves multiple funds under single management.
Best Cryptocurrency Funds in the UK
CoinShares is a London-based crypto hedge fund that emerged in 2017 after the Global Advisors Bitcoin Investment Fund was rebranded. The company consists of two funds, COINXBT & COINXBE and GABI & CoinShare. Its main goal is to monitor the digital market trends and investing in available assets.
Services and products:
- Cryptocurrency exchange;
- Active venture & income-generating strategies;
- Expert consulting;
- Comprehensive services in capital markets.
Isula Investments is another crypto hedge fund based in London, UK launched in late 2019. Like all companies of its type, it offers services for cryptocurrency management. According to information on their website, Insula created a completely secure and decentralized platform for investors to purchase, store, and transfer their crypto funds to any place on the globe.
- Insula offers its own token (ISLA) that supports the decentralized system of the cryptocurrency management environment;
- Investors have complete control of their funds;
- All transactions are completely transparent at all stages.
The company offers two types of investor membership:
- Insula investment management (members only pay a 30% performance fee).
- Insula Premium (costs 500 ISLA per year).
Nickel Digital is a digital currency manager based in London and founded by investment market experts with years of experience from the most prominent banks and hedge funds. Nickel Digital uses the arbitrage hedge fund strategy to take advantage of fluctuations in prices for the most viable assets.
- The company offers digital funds management services for institutional investors;
- Investors have access to a number of index-monitoring tools;
- Offers secure and transparent access to the major crypto assets;
- In order to start investing, investors need to complete a form on the website and provide contact information.
This is yet another London-based digital currency investment manager on our list. Crypto Global Management was found in 2017 by a strong team of experts with extensive experience in blockchain and asset management.
- CGM offers the services of digital currency management, crypto portfolio management;
- Active and passive crypto strategies;
- Protection of digital funds and complete transparency of service;
- Investors choose options suitable to them personally.
How to Invest in a Crypto Fund
Compared to individual investors, a fund’s team has a great deal more possibilities to track information on cryptocurrency markets. And that’s quite important, taking into account the volatility of these markets. Besides, these companies usually have access to insider information because it’s likely their experts worked at stock markets or were involved in crypto projects development.
That being said, dealing with these companies is often fraught with risks. After all, to make an investment, you have to completely trust the fund professionals. This is why doing thorough research before making such an investment is a must. Make sure that you are dealing with experienced, competent professionals, a secure and transparent investment environment.
Here are a few things to consider:
- The team. The cryptocurrency fund founder must have a solid background. More often than not a simple Google search might reveal quite a lot of useful information.
- Investors. If there are other investors willing to entrust their funds to this company’s experts, it says volumes about the company itself. Of course, these investors must have some experience too. Look for testimonials and reviews.
- Fund’s age and dynamics. The longer it stays on the market the more reliable it probably is.
- Profitability. For a potential investor, it’s absolutely natural to go by the fund’s profit margins. Compare the company’s profit margins with those of other funds.
- Transparency. Any investor must have access to their investment portfolio. If you are investing, it’s your right to know what cryptocurrency and in what amounts you have at the moment.
Once you make sure that you’ve found the crypto fund that is really reliable, consider using online asset managers like Tokenbox. Projects of this kind make it very easy to work with cryptocurrency funds.
Unfortunately, the volatility of the cryptocurrency market raises doubts about the productivity of the majority of existing cryptocurrency funds. But with proper research and provided you choose the right crypto asset manager with experienced professionals at the helm, this kind of investment becomes the easiest and most convenient both for new and experienced investors.