Key Takeaways
- • Crypto hedge fund AUM rose to roughly $15.2 billion in Q4 2023, with fundamental strategies holding $11.4 billion, quant directional funds $1.8 billion, and market neutral funds $1.9 billion, according to Galaxy's 2024 Institutional Crypto Hedge Fund & Venture Report.
- • Only about 3.9% of liquid crypto hedge fund managers outperformed Bitcoin in 2023, versus 5.9% in 2019, while the Bloomberg Galaxy Bitcoin Index gained 153.01% in 2023.
- • Crypto venture fundraising fell to $5.75 billion across 58 funds in 2023, down from a record $37.7 billion across 262 funds in 2022, with crypto's share of global venture fundraising dropping to roughly 3.53% from 12.62%.
- • An estimated 250 of 715 crypto-dedicated hedge funds closed between May 2022 and December 2023, nearly 35% of the market, per VisionTrack data.
- • Only about 34% of crypto hedge funds have a 3+ year track record, and the top 20 funds held roughly 71.6% of total hedge fund AUM at year-end 2023, down from roughly 75% at end-2022.
Summary
Galaxy's 2024 Institutional Crypto Hedge Fund & Venture Report, drawing on VisionTrack data, shows crypto hedge fund assets rebounding in late 2023 after a difficult 2022 marked by industry bankruptcies and redemptions. Crypto hedge fund AUM jumped in Q4 2023 to approximately $15.2 billion, with the median fund size growing modestly through the year, largely due to cryptocurrency price appreciation, and subscriptions increasing in the fourth quarter.
Performance was driven largely by Bitcoin. The Bloomberg Galaxy Bitcoin Index gained 153.01% in 2023, while the VisionTrack Composite Index returned 64.02%, the Fundamental Index 101.96%, the Quant Directional Index 56.41%, and the Market Neutral Index 18.48%. The report notes that the top two quartiles of fundamental and quant directional funds outperformed Bitcoin in the second half of 2023, though only about 3.9% of managers beat Bitcoin for the full year. The VisionTrack Fundamental Index posted its best quarter since Q1 2021 in Q4 2023, gaining 57.85%, nearly matching Bitcoin's 58.12% gain in the quarter. Bitcoin's rally was supported by anticipation of US spot Bitcoin ETF approvals, including BlackRock's June 2023 filing, and an October 2023 rally dubbed "Uptober," in which Bitcoin rose 28.34%.
Fundraising remained challenging. US-based asset managers reduced allocations to crypto hedge funds, and some active managers introduced BTC-denominated share classes targeting annual returns of BTC +10-15% to compete with spot ETFs. According to VisionTrack, this cohort returned +7.59% in BTC terms in 2023, though it remains small.
Venture activity contracted sharply. Crypto-native firms accounted for 72% of crypto venture funds closed in 2023, and the report estimates they typically close 81% of crypto-dedicated venture funds. Bitcoin's share of the top ten liquid tokens reached 47.8% at year-end 2023, with total crypto market capitalization growing from $840 billion to $1.77 trillion over the year. The report characterizes 2023 as a year in which operational controls and banking and custody relationships were prioritized following the 2022 failures.
Performance was driven largely by Bitcoin. The Bloomberg Galaxy Bitcoin Index gained 153.01% in 2023, while the VisionTrack Composite Index returned 64.02%, the Fundamental Index 101.96%, the Quant Directional Index 56.41%, and the Market Neutral Index 18.48%. The report notes that the top two quartiles of fundamental and quant directional funds outperformed Bitcoin in the second half of 2023, though only about 3.9% of managers beat Bitcoin for the full year. The VisionTrack Fundamental Index posted its best quarter since Q1 2021 in Q4 2023, gaining 57.85%, nearly matching Bitcoin's 58.12% gain in the quarter. Bitcoin's rally was supported by anticipation of US spot Bitcoin ETF approvals, including BlackRock's June 2023 filing, and an October 2023 rally dubbed "Uptober," in which Bitcoin rose 28.34%.
Fundraising remained challenging. US-based asset managers reduced allocations to crypto hedge funds, and some active managers introduced BTC-denominated share classes targeting annual returns of BTC +10-15% to compete with spot ETFs. According to VisionTrack, this cohort returned +7.59% in BTC terms in 2023, though it remains small.
Venture activity contracted sharply. Crypto-native firms accounted for 72% of crypto venture funds closed in 2023, and the report estimates they typically close 81% of crypto-dedicated venture funds. Bitcoin's share of the top ten liquid tokens reached 47.8% at year-end 2023, with total crypto market capitalization growing from $840 billion to $1.77 trillion over the year. The report characterizes 2023 as a year in which operational controls and banking and custody relationships were prioritized following the 2022 failures.
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