Encryption hedge funds shine in 2024 but fail to outperform Bitcoin

In the standout year of 2024 for cryptocurrency, hedge funds focused on digital assets also performed well, as expected. However, the performance of these hedge funds still pales in comparison to the most famous token in the crypto industry - Bitcoin. According to data provided by VisionTrack, the VisionTrack Composite Index, which tracks the performance of 130 cryptocurrency hedge funds, rose by 40%. But compared to Bitcoin's huge surge of 120% in 2024, the gains of these hedge funds seemed insignificant. Many hedge funds have made every effort to differentiate themselves through proprietary or innovative investment strategies, which may not always include buying Bitcoin. This means that hedge funds that did not invest in Bitcoin missed out on its lucrative returns. Meanwhile, investors seeking exposure to cryptocurrency in the past year were attracted to Bitcoin exchange-traded funds (ETFs) which are easy to trade and have lower fees, allowing them to enter the market without having to go through high-fee hedge funds. David Kalk, Founder and Chief Investment Officer of Reflexive Capital, said: "For many cryptocurrency funds, 2024 was a challenging year, as it was a year for Bitcoin and memecoins - they were the best assets, leaving everything else behind." Cryptocurrency funds based on token or blockchain fundamentals performed well overall in 2024. For example, Reflexive Capital operates a fundamentally-oriented long-biased cryptocurrency hedge fund, which saw a net return increase of 106% in 2024. However, according to VisionTrack's data, hedge funds focusing on digital asset industry-specific and quantitative strategies performed the best last year. In 2024, the VisionTrack Quantitative Direction Index rose by 53.7%, while the VisionTrack Fundamental Index rose by 40.4%, and the VisionTrack Market Neutral Index rose by approximately 18.5%. In an email statement, the Galaxy Research team stated: "For cryptocurrency funds, 2024 was a turbulent year, with significant declines of 20%-30% throughout the spring and summer, but finishing strong by the end of the year." "The return distribution was wide, with underperforming funds not prepared for the rally in November, only funds ranking higher performing better than Bitcoin." According to Galaxy Research's data, most of the gains for cryptocurrency hedge funds in 2024 occurred in the last quarter, as the pro-crypto stance of Trump, who won the US presidential election. In addition, the launch of Bitcoin spot ETF at the beginning of 2024 also attracted many investors. The strong performance of cryptocurrency hedge funds in 2024 has made those raising new capital optimistic, especially with the incoming Trump administration's support for the crypto industry. David Kalk said: "With the catalyst driving this, investor enthusiasm for the sector has certainly shifted. Financing seemed very challenging in the past years, and this situation may change in 2025."