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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
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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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5 Best Upcoming Cryptocurrencies to Watch in 2019

  • Denys Serhiichuk
    📚 WikiCoin

    Almost every day new coins are being added on the Coinmarketcap. The list of coins is not limited to Bitcoin, Ethereum and other popular digital assets. Traders and investors are looking for alternatives to maximize their profits in 2019. We created the list of cryptocurrencies which are already widely discussed today. Hope you will choose the right one.

5 Best Upcoming Cryptocurrencies to Watch in 2019
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Today, in the cryptocurrency ranking on Coinmarketcap, more than 2,000 digital assets are represented. Of course, not all of them have real value and potential for further development. We cannot be 100% sure which coins will be profitable in 2019, as the crypto market is too volatile and unpredictable.

What are the prospects for “young” cryptocurrencies in 2019? Let's try to identify the top five coins that should shoot up in the near future.

cryptocurrency pool

OmiseGo

OMG is the digital coin of the OmiseGO blockchain platform. The project is based on open source code. Developers initially focused on the creation of new tools to eliminate society's dependence on banks.

The OMG platform is designed to help conduct financial transactions, even for those people who live in countries with no traditional financial infrastructure in the form of banks. This service is the result of the development of the Asian company Omise, which is the leading payment provider.

OmiseGo prospects for 2019

OmiseGo cryptocurrency project is a really interesting platform with good prospects for further development.

Once the official OmiseGo wallet is released, there is supposed to be a “bear” trend of this currency. After that, an influx of new users is expected, which will make the coin more stable. Despite the fact that in 2018 the cost of the coin dropped to $3.70, the project still has good opportunities to return to its maximum highs. It is predicted that by the end of 2019 the rate of OMG can grow to $40-50. Of course, such forecasts are overly optimistic, but if the Chinese government keeps improving regulations of the crypto market, then Omise may achieve such indicators.

Despite all its prospects and interest from main market players, it is impossible to predict the exact value of the coin.

VeChain

VeChain logo

It is a public blockchain ecosystem, the main task of which is to digitize all the data that is obligatory for a successful business. First of all, we are talking about establishing a decentralized database of products, as well as creating a platform for monitoring their quality and process of delivery. The project solves issues for the market of the Internet of Things, which is a trend nowadays.

The platform has already released its own blockchain, VeChainThor, and is working to improve it.

VET coin has become available for trading since August 3, 2018. Nevertheless, we can summarize that the coin feels pretty confident in the market.

Growth factors:

  • Positive feedback from users

  • The platform has successfully completed the transition to its own blockchain

  • VET shows stability relative to other altcoins

  • VeChain has lots of serious partners who are ready to provide investments

ICON

ICON (ICX) is a blockchain platform designed to work with several different blockchains. In other words, ICON is a cross-chain solution that provides solidity for various blockchain projects. The implementation of ICON should improve the efficiency of the project's economy.

ICON ecosystem

Advantages of ICON:

  • Ensuring full universality in the system of interaction between the platform and users

  • The possibility of making modifications to smart contracts

  • The ability of quick transactions on the exchange

  • Fast information processing

  • Adaptability to working with artificial intelligence

The ICON project has official support from the South Korean government. This may be an indication that large Korean businessmen are seriously interested in the coin. Now a number of financial, medical and educational organizations from South Korea have begun to work closely with ICON in order to improve interaction with consumers. In addition, some other representatives of the business of this country and a number of corporations operating in the Asian market are showing interest in this project.

Thanks to the listed advantages of this digital currency, the 2019 forecast for ICON will be positive.

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Enjin Coin

ENJ cryptocurrency is a digital token platform for creating gambling applications. With Enjin Coin, developers can not only create virtual gaming products but also implement them. The project uses the Ethereum network, so ENJ tokens are in the ERC-20 format.

The biggest advantage Enjin Coin offers the gaming industry is the chance to set and manage virtual goods. Developers of any platform can easily create a currency designed exclusively for their community, which will be supported by Enjin Coin.

Each asset is kept in a single smart contract and registry, so all Enjin Smart Wallets can easily recognize it.

Enjin Coin ecosystem

The project, founded and maintained by the game giant Enjin, should create a real sensation after its launch. However, the project is relatively new, and still has much to prove. Taking into account current achievements, Enjin Coin might have a bright future.

AION

AION logo

AION is a third generation blockchain digital token. The essence of such platforms is the creation of an ecosystem where various projects can interact. Roughly speaking, the goal of AION is to create an ecosystem for blockchain startups.

AION is focused on the following issues:

  • The formation of a new infrastructure ensuring the integration of existing blockchain platforms.

  • Using its own scripting language to enable users to create unique digital cryptocurrency projects.

  • The final stage will involve the completion of the cryptosystem optimization process and ensuring its full scalability to speed up the exchange of information between users.

In 2019, the implementation of the network infrastructure is planned to be completed, providing everything needed for fast, efficient inter-network communication and inter-chain applications. In addition, the focus will be on such aspects as:

  • Collaborative networking

  • Complete consensus validator assessment mechanism

  • Launch of the second version of Aion Virtual Machine

The prospects for AION in 2019 will directly depend on the continued relevance of the idea of ​​combining existing blockchains into a single platform. For this reason, AION has every chance of success.

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How to choose the most promising cryptocurrency?

The answer is simple: they are always in the spotlight. They are discussed in the media, attracting the attention of large investors, companies, and corporations. Today, the product behind the name of a cryptocurrency project matters a lot. If there is a development, then it is fair to expect an increase in the price of this coin.

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