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Institutional money is flowing back into crypto. This is how a new hedge fund approaches the markets
It’s no secret that cryptocurrency prices are booming again, with Bitcoin hovering above $60,000 since late February and memecoins provoking a frenzy of speculation not seen since the start of 2022. And yet, the investors I speak with seem hesitant to assign the “bull market” label, perhaps scarred by the dramatic crisis. collapses of the last two years, or recognize that public awareness of the crypto resurgence is still non-existent.
Although Bitcoin has repeatedly reached all-time highs, retail traders still appear to be missing from the recent rally, which is instead driven by the one in January. approval Bitcoin ETFs and the long-awaited promise of traditional companies like asset managers entering the space. Institutional capital will always rule amateur traders, and the price explosion has restarted this cycle.
Like Bloomberg reported in December, even before the launch of ETFs, crypto hedge funds had been preparing for this moment. After a brutal 2022, which saw some flagship funds like Pantera Capital fall by 80%, results began to improve as Bitcoin rallied. Stoka Capital, founded by a Goldman alum who invests primarily in altcoins, gained 268% at the end of November.
New crypto hedge funds, which take outside capital and invest in public and private market assets, ranging from liquid tokens to company shares, have also started to appear. In January, I reported the launch of Split Capital, founded by alumni of LedgerPrime, a trading company acquired by FTX. Various LedgerPrime Alumni spear another hedge fund in February, signaling increasing business opportunities and interest from limited partners, or outside investors, who want to park their money in the new vehicles.
Now, another new crypto hedge fund is emerging: Lekker Capital, founded by Quinn Thompson, who previously worked at digital asset lending platform Maple Finance as well as traditional investment firm Guggenheim Partners. I spoke with Thompson last week, who told me he’s targeting a $20 million raise for Lekker and plans to begin trading in May.
Unlike many crypto hedge funds, which focus on liquid tokens ranging from Ether to smaller altcoins, Thompson said he would invest in both digital native tokens and public stocks like Bitcoin miners , Microstrategy and Coinbase, with an approximate 50/50 split between the two asset types. This strategy is driven by his view of the crypto market, which he says has been dominated by venture capital-style investments in private companies and was over-allocated during the previous cycle.
“The only liquidity events for all of these venture funds are either IPOs or tokens, and there is simply no capital basis for investment allocation to actually fund this and be buyers naturals in the liquid market,” he said. “You’re getting a return to traditional capital markets now that things are opening up a little bit.”
Thompson told me he thinks the broader macro environment is supporting crypto, with the Federal Reserve apparently ready to start cutting interest rates. I asked him if he was concerned about regulatory uncertainty, especially after Coinbase’s decision. loss in court last week. He said that despite the hostility of the current government, everything could change with the US elections later this year. “November has the potential to be a huge catalyst for the industry,” Thompson told me. “It’s hard to be too one-sided until then.”
Leo Schwartz
leo.schwartz@fortune.com
@leomschwartz
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