It's no secret that cryptocurrency prices are booming again, with Bitcoin holding north of $60,000 since late February, and memes driving a wave of speculation not seen since the early days of 2022. However, investors I spoke with seemed reluctant to describe… The “bull” of the market, perhaps influenced by the dramatic collapses of the past couple of years, or the recognition that public awareness of the return of cryptocurrencies is still lacking.
Although Bitcoin has repeatedly reached all-time highs, retail traders remain absent from the recent rally, which was instead driven by the January approval of Bitcoin exchange-traded funds and the long-awaited promise of traditional firms like asset managers who… They enter this field. Institutional capital will always lead amateur traders, and the explosion in prices set that cycle in motion.
As Bloomberg reported in December, before the launch of ETFs, cryptocurrency hedge funds were preparing for this moment. After a rough 2022, which saw some major funds like Pantera Capital fall by 80%, results are starting to improve as Bitcoin rebounds. Stoka Capital, founded by a Goldman alumnus and which invests mostly in altcoins, had gained 268% by the end of November.
New cryptocurrency hedge funds, which take outside capital and invest in public and private market assets, ranging from liquid tokens to shares in companies, are also beginning to emerge. In January, it announced the launch of Split Capital, founded by alumni of LedgerPrime, a trading firm acquired by FTX. Various LedgerPrime alumni launched another hedge fund in February, signaling a surge in trading opportunities — and interest from limited partners, or outside investors, who want to invest their money in the new instruments.
Today, another new cryptocurrency hedge fund is emerging, Lekker Capital, founded by Quinn Thompson, who previously worked at digital asset lending platform Maple Finance as well as traditional investment firm Guggenheim Partners. I spoke with Thompson last week, who told me he's targeting a $20 million raise for Lekker and plans to begin trading in May.
Unlike many cryptocurrency hedge funds, which focus on liquid cryptocurrencies from ether to smaller altcoins, Thompson said he will invest in both native cryptocurrencies and public stocks like Bitcoin miners, Microstrategy, and Coinbase, with an approximate 50/50 split. Between two types of assets. This strategy is driven by his outlook on the cryptocurrency market, which he says was dominated by venture-style investments in private companies and over-allocated during the previous cycle.
“The only liquidity events for all of these investment funds are either IPOs or tokenizations, and there is no capital base to allocate the investment to really fund that and be natural buyers in a liquid market,” he said. “You're getting a return to traditional capital markets now that things have opened up a little bit.”
Thompson told me he believes the broader macro environment is supportive of cryptocurrencies, as the Federal Reserve appears poised to start cutting interest rates. I asked him if he was concerned about regulatory uncertainty, especially after Coinbase lost in court last week. He said that despite the hostility of the current administration, everything could change with the US elections later this year. “November has the potential to be a huge catalyst for the industry,” Thompson told me. “It's hard to go in one direction until then.”
Leo Schwartz
leo.schwartz@fortune.com
@leomschwartz
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