The cryptocurrency bull run in 2021 took the world by storm and saw swarms of people investing their money in the very volatile but rewarding market.
But the crypto market is very volatile and has a plethora of currencies that may take a good chunk of time to study and evaluate. For the people that do not have the time to take a deep dive and still want to get exposure to cryptocurrencies, here are some crypto funds that are worth looking at.
What is a crypto fund?
A cryptocurrency fund is an investment fund that trades and invests the money of the people. They are like regular investment funds but remain limited to the crypto market.
These funds offer to manage the capital on behalf of the investor to provide them the best possible return. The experts analyze and research to trade and invest in different crypto assets that will generate returns for the investor and take a commission fee. Some take a commission off of the profit while others take a commission on the invested capital.
The responsibility of these companies include:
- Constructing a client portfolio.
- Find assets that give high returns. i.e multibaggers.
- Make the right management strategy.
- Investment analysis and risk assessment.
There are 2 broad categories of these startups, ICO investors and the others are traders. The ICO investors depend on the popularity and growth of the product they have invested in to make profits.
The traders invest and trade the cryptocurrency to generate profits.
How do Crypto Funds work?
The main goal of the fund is the sale of the tokens. When the price of the token that someone invested in goes up, they profit. The owner can either cashout or wait for the price to increase further.
The price of the token depends on the capitalization of the fund, when the capital increases, the price increase too.
The investment firms get into an agreement with the investor that specifies the commission and the informs them of all the risks that come with crypto trading.
Each fund has its own unique strategy that generates profits for them, but they invest in the below-mentioned assets in varying degrees.
-Valuable and stable cryptocurrencies that are profitable.
-Undervalued crypto that has significant potential
The distribution of funds and the subsequent profits depend from fund to fund. The analysts read and analyze the market to find any shifts that they can cash out.
Types of Crypto Hedge Funds
Crypto investment funds are of 2 types: unit investment funds and hedge funds. The hedge funds take a commission from the investor for managing their wealth and have some policies that must be obeyed by the investor, i.e withdrawal of their money after the agreed time period only.
The strategy employed by the fund also divides it into 2 types:
-Qualitative, that has been chosen by a manager
-Quantitative, that has been chosen by a (super) computer
There are a few more dictating strategies that the funds follow to generate profits, they are:
- Global macro strategy: The experts analyze macroeconomic events in the world that may affect the market and invest accordingly. These trends affect the global market, such as the rise or fall in people’s incomes, debt, savings, interest rates of banks, etc. are a few examples.
- Directional strategy: The experts try to predict a change that affects the market’s sentiment and make a profit.
- Relative value strategy (arbitrage): The relative value strategy is employed to do apples to apple comparison of assets. When the price of similarly valued assets is different, the traders exploit that to make money.
- Multi-manager strategy: This strategy involves the management of a fund with the help of multiple managers that invest in different assets. This includes varying styles and asset classes that deem fit to the manager.
Best Crypto funds in the UK
Insula Investments is a London-based crypto hedge fund. Launched in 2019, it offers cryptocurrency management services to investors. The firm has created a secure and decentralized platform for investors to buy, store, and move their funds anywhere.
- The company has the ISLA token that offers the decentralization system for cryptocurrency management;
- The investors have total control over their crypto funds;
- There are no hidden transactions, and there is complete transparency at all stages. The investor can invest through 2 types of membership:
- Insula investment management (has up to 30% performance fee).
- The Insula Premium costs 500 ISLA/year.
Crypto Global management is a crypto investment manager based in London. Founded in 2017 by a group of experts with immense experience in blockchain and asset management.
- It offers cryptocurrency and crypto portfolio management;
- The firm has what they call, Active and passive strategies;
- The funds are fully secure and there is complete transparency;
- Investors can choose the type of strategy that suits them best.
Based in London, Nickel Digital is a cryptocurrency manager founded by a group of investment market experts with years of experience under their belt. The fund uses an arbitrage hedge fund strategy to make the most of the change in prices for the most sought-after assets.
Nickel Digital offers digital fund management for institutional investors;
The investors are provided many analytics tools;
The company also offers fully secure and transparent management of crypto assets;
Coinshare is UK based crypto hedge fund that started in 2017 post the rebranding of Global Advisors Bitcoin investment fund. This company majorly holds two funds – COINXBT & COINXBE and GABI & CoinShare. The main goal of Coinshare is to monitor the market and provide possible investment opportunities available for the given assets.
Coinshare offers –
- Cryptocurrency Exchange Platform
- Investment Strategies
- Crypto Consultation
- Other services related to Capital Markets
How to Invest in a Crypto Fund
If you do not have knowledge and experience in investing, then an investment fund is the way to go for the best possible returns on the capital. An investment fund has the tools to analyze and invest in making profits on the capital. Another important factor is the volatility of these markets requires accurate analysis and timely trades for the best returns.
Investors must have full trust in the people that they allow to manage their wealth and must not fret when the market is down. Therefore it is important to do a background check on the funds you might be inclined to put your money in to have a desirable outcome. Below is a checklist of things that you should do before agreeing to invest in a fund:
- The managers: You should always check the background of the people that you might want to let invest your money.
- Investors. The list of investors reveals a lot about the company if a well-known company has poured its money into the fund. it vouches for the credibility of the fund.
- Fund’s age: The longer the fund has been active, the more reliable it is.
- Returns: You should compare the average returns of past years of different funds to find the best one for yourself.
- Transparency: The investment fund should have complete transparency of its investments, and the portfolio should be accessible to the investor.
It is a wise decision to earn a passive income on your money by investing in an asset such as Cryptocurrency. However, not everyone has the time to do the research. So investing through the right fund is very important. Always do a background check and compare options to find the investment fund that suits your needs.