It's no secret that crypto prices are surging again, with Bitcoin topping $60,000 since late February and meme coins sparking a frenzy of speculation not seen since early 2022. Despite this, the investors I spoke to seem hesitant to label it as “bullish.” It may be scarred by the dramatic collapse of the past few years, or it may be that it recognizes that public awareness of a crypto resurgence does not yet exist.
Despite Bitcoin repeatedly hitting new all-time highs, retail traders still appear not to be participating in the recent rally, instead relying on the approval of a Bitcoin ETF in January and asset managers like The driving force behind this is the long-awaited entry of traditional companies into this field. Institutional investors have always led hobby traders, and the price explosion has accelerated that cycle.
As Bloomberg reported in December, crypto hedge funds were preparing for this moment even before ETFs launched. After a tough 2022 that saw some flagship funds, such as Pantera Capital, drop 80%, performance has started to improve as Bitcoin slowly recovers. Stoka Capital, which was founded by Goldman alumni and invests primarily in altcoins, was up 268% through the end of November.
New crypto hedge funds are also starting to emerge, bringing in outside capital and investing in assets in both public and private markets, ranging from liquid tokens to company stocks. In January, I reported on the launch of Split Capital, which was founded by alumni of trading company LedgerPrime, which was acquired by FTX. Various Leisure Prime alumni launched another hedge fund in February, signaling expanded trading opportunities and growing interest from limited partners and outside investors looking to park their money in new vehicles.
Yet another new crypto hedge fund is emerging today. Wrecker Capital was founded by Quinn Thompson, who previously worked at digital asset financing platform Maple Finance and traditional investment firm Guggenheim Partners. When I spoke with Mr. Thompson last week, he said he was aiming to raise $20 million for Mr. Recker and expected to begin trading in May.
Unlike many crypto hedge funds, which focus on liquidity tokens ranging from ether to small-scale altcoins, Thompson focuses on digitally native tokens and public stocks like Bitcoin Miner, MicroStrategy, and Coinbase. He said he would invest in both, roughly 50/50. Two types of assets. The strategy is driven by his outlook on the crypto market, which he says is dominated by venture-style investments in private companies and was over-allocated in previous cycles.
“The only liquidity event for all these venture funds is either an IPO or a token, and there is no capital base for investment allocation to actually fund it and be a natural buyer in the liquidity market. '' he said. “Now that things are opening up a little bit, we're moving back to traditional capital markets.”
Thompson told me that the Federal Reserve appears poised to start cutting interest rates and believes the broader macro environment is supportive of cryptocurrencies. I asked if he was concerned about regulatory uncertainty, especially after Coinbase's loss in court last week. He said all that could change in the US elections later this year, despite the current administration's hostility. “November could be a big trigger for the industry,” Thompson told me. “Until then, it will be difficult if it becomes too one-way.”
leo schwartz
leo.schwartz@fortune.com
@leomschwartz
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