According to data from 21e6 Capital AG, about 13% of crypto funds, or 97 funds, ceased operations in 2023 due to difficulties in finding partners for banking services.
After the crash of FTX last year, many crypto funds are holding larger than usual amounts of cash and missing out on Bitcoin’s bull run since early 2023. Meanwhile, other cryptocurrencies (altcoins) performed much worse than Bitcoin. According to Bloomberg, the average crypto funds generated 15.2% returns in the first half of 2023, less than Bitcoin, which has grown 83.3% over the same period. Funds with a neutral strategy performed the worst, generating only 6.8% average returns in the first six months of the year.
Many funds are still struggling to find new partners for banking services after Silvergate Capital and Signature Bank closed earlier this year, said Maximilian Bruckner, head of marketing and sales at 21e6. . Not only that, but the legal battle between regulators and exchanges makes crypto funds even more difficult. While the launch of new funds bodes well for investors, the situation has not fully recovered, Bruckner added.
Company 21e6 tracks the status of more than 700 crypto funds globally, including 123 funds based on data reports of 70 companies.
Earlier this year, a crypto investment firm known for its token bets Luna Galois Capital closed its fund after being affected by the collapse of the crypto exchange FTX.
Digital asset investment company BlockTower Capital announced the closure of a crypto fund in April. Director Invest BlockTower’s Ari Paul said the opportunity for a market-neutral strategy has narrowed significantly after what happens in 2022. In addition, interest rate hikes and regulatory scrutiny contribute to bringing the company to a decision to close the fund. However, BlockTower CEO Matthew Goetz emphasized that this is not related to FTX, instead, he thinks that closing the fund helps the company to allocate time and focus on other more attractive opportunities.