Key Takeaways
- • The VisionTrack Crypto Hedge Fund Composite Index returned +1.71% in February 2023, bringing year-to-date performance to +21.01%, according to Galaxy Digital research.
- • Bitcoin gained just +0.07% and Ethereum returned +1.26% in February, with the Bloomberg Galaxy Crypto Index up +0.34%, reflecting a flat, sideways market.
- • The VisionTrack Fundamental Index returned +41.76% year-to-date, while the Quantitative Index returned +10.25% and the Market Neutral Index returned +3.80%.
- • Liquid staking TVL reached $14.08B, surpassing lending/borrowing TVL of $13.70B to become the second-largest DeFi category behind decentralized exchanges at $19.33B.
- • The Silicon Valley Bank failure and New York DFS action against Signature Bank forced many crypto hedge funds to shift operations to crypto-friendly banks.
Summary
Crypto markets were largely flat in February 2023, according to Galaxy Digital's monthly VisionTrack hedge fund performance update. The VisionTrack Crypto Hedge Fund Composite Index gained +1.71% for the month, lifting its year-to-date return to +21.01%. Bitcoin rose just +0.07% and Ethereum returned +1.26% over the period, while the Bloomberg Galaxy Crypto Index returned +0.34%. Galaxy characterized the month as a sideways market with no clear trend, marked by low volatility and lingering concerns about contagion from the prior year's failures. Through February and year-to-date, the VisionTrack Fundamental Index returned +41.76%, the Quantitative Index +10.25%, and the Market Neutral Index +3.80%. The report notes that all sub-categorical indices, excluding Fundamental, underperformed BTC's +39.74% year-to-date return.
Manager attention turned to 2023 opportunities. Galaxy highlighted continued growth in liquid staking, with TVL rising to $14.08B, passing lending/borrowing protocols at $13.70B and ranking second only to decentralized exchanges at $19.33B by month-end. Galaxy also pointed to growing interest in tokenized real-world assets, including early tokenized investment funds, which it said are creating new forms of collateral and financial products.
The report also covered banking-sector stress in mid-March. Silicon Valley Bank's failed emergency financing prompted scrutiny of traditional banks' unrealized losses on securities and held-to-maturity deposit ratios. A joint announcement from the Federal Reserve, Treasury Secretary, and FDIC guaranteed SVB deposits, easing market tension. However, the New York State Department of Financial Services ordered Signature Bank to suspend activity to protect depositors. Rep. Tom Emmer characterized the move as a "weaponizing" effort to "purge legal crypto activity from the U.S." Galaxy said the developments put crypto hedge funds in an operationally difficult position, with many shifting to alternative crypto-friendly banking institutions, and that it continues to monitor new service providers gaining deposits.
Manager attention turned to 2023 opportunities. Galaxy highlighted continued growth in liquid staking, with TVL rising to $14.08B, passing lending/borrowing protocols at $13.70B and ranking second only to decentralized exchanges at $19.33B by month-end. Galaxy also pointed to growing interest in tokenized real-world assets, including early tokenized investment funds, which it said are creating new forms of collateral and financial products.
The report also covered banking-sector stress in mid-March. Silicon Valley Bank's failed emergency financing prompted scrutiny of traditional banks' unrealized losses on securities and held-to-maturity deposit ratios. A joint announcement from the Federal Reserve, Treasury Secretary, and FDIC guaranteed SVB deposits, easing market tension. However, the New York State Department of Financial Services ordered Signature Bank to suspend activity to protect depositors. Rep. Tom Emmer characterized the move as a "weaponizing" effort to "purge legal crypto activity from the U.S." Galaxy said the developments put crypto hedge funds in an operationally difficult position, with many shifting to alternative crypto-friendly banking institutions, and that it continues to monitor new service providers gaining deposits.
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