Crypto Hedge Funds – Did You Know They Existed?

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Hedge funds are some of the most secure assets to invest in. They involve expert analysis for the market growth and advising on an investment strategy. 

As the next frontier of assets, crypto hedge funds are becoming more viable. Here is all you need to know about the hedge funds;

Reasons for the Increase in Crypto Hedge Funds 

Even though hedge funds are not a new concept in the financial world, they are becoming more popular in the crypto world. One of the reasons for the increased uptake is the rising value of crypto. 

Most investors had treated crypto with doubt in the earlier stages. It has, however, beat all the doubters. The crypto world has been rising even though economic testing times.

While the cryptos are growing, they still have a volatile nature. One is never sure whether they will make returns on investments or not. Hedge funds, however, make it more assured of returns.

Types of Crypto Hedge Funds

Trading in crypto hedge funds allows diversity. There are various funds to choose from. These include: 

• Quantitative which are meant to beat the running market conditions. A team of industry experts analyzes the prevailing market then come up with the most suitable trading options. These trading options tend to prosper during a bull run. You have to stay on the lookout in case the market dives. 

• Forex trading – this is the most popular crypto hedge fund type. It involves the crypto traders developing trading strategies to pair the various trade pairs. They use various market tools like technical analysis. It also looks into current market trends and other economic movers. Forex trading is excellent for both bear and bull runs. The analysis of buying and sell in real-time. 

• Arbitrage – this is all about taking advantage of the differences in the various markets. The different exchanges come with various prices depending on regulations and demand. You can buy the assets at a low price and sell on the higher end. Arbitrage requires special market comparison software. It also requires fast execution. 

• Multi-strategy – you don't have to stick to a single strategy. Multi-strategy allows you to couple up the different trading options. The strategy helps in spreading risks.

How to Start a Crypto Hedge Fund 

Now that you understand why the hedge funds are the next frontier in crypto, you can start trading. Here is how to go about starting to trade in cryptos;

1. Learn about the hedge funds 

The first step towards any investment is by learning. Take time to understand what hedge funds are all about. This is the point to understand the different resources and assets available to you. You also establish the requirements and if you are up for it. Learn from various sources like experienced traders and other online sources. 

Once you learn about the assets, you can come up with a working investment strategy. You can choose between short or long systemic investments. You might also mix the two. Go for long positions on the bull and short on the bear runs.

2. Choose the Trading Platform 

Once you have the information you need and a trading strategy, the next point is to look for a reputable trading platform. The platform you trade in is as essential as the hedge funds. The different platforms have varying regulations. They also concentrate on various coins. 

Only work with a trusted and verified platforms. Take time to research some of the fastest growing and established platforms. With these, you know what to expect. Due diligence also keeps you from the several crypto scams. 

3. Analyze and Invest

With the trading platform in check, it is time to start the hedge fund trading. Feel free to analyze the different assets on the platform. Consider different coins and assets. Investing in various assets helps to spread risks. 

Look into all the possible returns from the assets of choice. You also need to check the necessary platform provisions. Only invest in the asset after verifying the disclaimers or other conditions. 

4. Enjoy the outcome 

The main reason to invest in the hedge fund is to gain in the long run. The three steps above prepare you for the ultimate goal. When you are knowledgeable, you make the right platform and asset choices. You end up reaping on returns. 

Also, remember to always leave some space for possible losses. 

Is Hedge Fund Worth the Hype?

Nothing makes a trader invested than the prospects of assured returns. Everyone invests their money in the hope that they gain back more in return. That is why the prospects of assured profits in crypto hedge funds make it an ideal choice. 

Still, like any other investment, you have to take caution trading the hedge funds. The funds diversify investments to eliminate risks. That does not make it risk-free. 

Any adverse economic turmoil can impact it. These come with deep losses for investors. 

A case in point is an example of the coronavirus. The virus saw the economy tumble, unlike never before. Even though both Bitcoin and hedge funds struggled in the earlier pandemic days, they have bounced back differently. 

Bitcoin has grown more than three-fold since the corona pandemic. It has rallied from the lows of $3k to trade at the current over $10k. It even at some point hit the $10k mark. It has, however, been different for the hedge funds. Most of the funds experienced acute losses with some closing in the process. They are still in the process of bouncing back from the "bloodbath."

This is not to discourage you from taking up the hedge funds. They remain a better deal from the crypto funds. You, however, must understand the risks involved. Just as the coin offers better returns, they take the biggest hit in case of a disaster. 

The crypto hedge funds are still on a recovery path. 

Bottom Line 

Trading in hedge funds comes with better safety than the cryptos. Use this guide to learn how to trade in it. 

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