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Bear Market Prevents Crypto Hedge Funds From Earning Performance Fees

  • Alex Morris
    📰 News

    Crypto hedge funds will close en masse due to a “double whammy” of the bearish market and the ‘highwater’ clause


Bear Market Prevents Crypto Hedge Funds From Earning Performance Fees
Contents

Multicoin Capital’s Anthony “Pomp” Pompliano took to Twitter to share his take on why more cryptocurrency hedge funds may go out of business at end of 2018. Notably, he believes that it is mainly attributed to their fee structure while the dramatic crypto remains a minor factor.   

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A frontloaded success

Back in August, Crypto Fund Research pointed out the number of crypto-oriented hedge funds is expected to hit a new high in 2018. So far, as many as 198 hedge funds have been launched in 2018, and it is expected that this number will increase to 220 by the end of the year. This growth was supposed to be prompted by growing investor demand.

Later, U.Today reported about a study published by a fintech research startup Autonomous that vividly shows the decline of cryptocurrency hedge fund. 2017 was the high time to open a cryptocurrency hedge fund — especially during the market peak in December, — but the crypto crash was quickly followed by a decline in revenue. Despite the fact that Pantera Capital raked in a whopping $71 mln only this July, other funds suffered from an average 50 percent drop.  

A ‘highwater’ clause

Still, according to Pompliano, the decline in price is not the main factor why hedge funds will start closing their doors en masse. The majority of hedge funds charge AUM fees, which is usually set at 2 percent. Most of the revenue, however, comes from the so-called “performance” fee; some hedge funds may charge up to 20 percent.

Let’s do simple math: if a fund eventually had $5 mln assets under management and it eventually doubled their amount by the end of the year to $10 mln, it would pocket $1 mln in fees. In order to keep collecting performance fees from their clients, it would need to pass this $10 mln benchmark in 2018, which is pretty much impossible due to the 80 something drop in crypto prices.
 
Hence, hedge funds can either raise new capital or close their doors. Another option — waiting for better market sentiment in Q4 2018.

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Cover image via u.today
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Litecoin (LTC) User Pays 200 LTC Fee to Transfer Slightly Under 9 LTC

  • Yuri Molchan
    📰 News

    A LTC user has recently✔️ ⏳ sent a small Litecoin amount and had to pay✔️ 💸 a 200 LTC fee for verification, even though s/he was only moving📈 8.88 LTC


Litecoin (LTC) User Pays 200 LTC Fee to Transfer Slightly Under 9 LTC
Contents

Recently, a Litecoin user has made a transaction to send 8.88 LTC (slightly under $1,000). The network fee he had to pay for it was huge – a bit more than 200 LTC, though. That is $20,500.

Strange spike in LTC transaction fees

The news was reported by Litecoin.com, the Chinese mining pool LTC.Top included the expensive transaction into the block 1636831 and verified it, taking the abnormally big fee.

Instead of paying a regular fee of about $0.05 on the LTC network, the user had to pay $0.70 – a fee which miners collected in late 2017 when LTC was at the peak of its peak price at $400.

After that LTC and other altcoins lost 80 percent of their value along with Bitcoin.

The fee per kB totalled 83.23080000 LTC ($7,297.68)

The fee per kWU totalled 20.80770000 LTC ($1,824.42)

The fee per kVB equalled 83.23080000 LTC ($7,297.68)

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The abnormal fee should be returned

The transaction turned out to be a consolidation of funds. Since the first appearance of this address on the network, it has conducted slightly under 2,600 transactions with LTC.

Since funds are often added and removed from this address, Litecoin.com believes that it is a corporate wallet. Litecoin.com reports that most likely the accident was a pure error either based on human behaviour or on software error.

The website urges readers to reach out to the LTC.Top mining pool and get them to return the fee to the transaction maker.

Cover image via u.today
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