'Altcoins may provide investors with a better return than Bitcoin.'

 ‘Altcoins may provide investors with a better return than Bitcoin.’

As the cryptocurrency market obtains credibility, a growing number of institutional investors are flocking to the sector to profit from its lucrative returns. The complexities and rapid evolution of digital assets, on the other hand, have contributed to the emergence of crypto-themed hedge funds. These are intended to provide these investors with safer and more diverse institutional-grade investment solutions.

Diversification is key

Their popularity and preferences are reflected in the fact that crypto-hedge funds managed to outperform Bitcoin in November, according to a recent Bloomberg report. While Bitcoin closed in November with a loss of 6.5%, hedge funds with diverse crypto-exposure lost only 2%.

Bitcoin has been in difficulties for about a month, as it continues to find resistance around the $50,000 mark. The cryptocurrency has been on a downward trend since reaching a fresh all-time high of around $69,000. It has lost 31.9 percent of its worth as a result of the same.

Portfolio diversity has been hedge funds' saving grace. This gives you access to a variety of potential altcoins.

Ethereum is the best example of this, with gains of almost 500 percent over the last year compared to Bitcoin's 67 percent. Other developing altcoins, such as Solana, have risen 10,650 percent to become the fifth largest cryptocurrency. Even Terra, which has increased in value by 14,748 percent, has delivered additional gains to these funds.

An NFT-focused fund

With a growing appetite for these products and their continued success, asset managers are expanding their offerings in creative manners. Earlier this week, Bitwise introduced a new NFT-focused fund to add to its growing suite of newly launched crypto-products. Crypto-investment firm Pantera Capital also recently raised $600 million for its fourth fund, with about 75% of the capital coming from institutional investors.

Another milestone was achieved by crypto-hedge funds recently when they hit weekly record inflows of $1.5 billion when the first BTC ETF was launched in the U.S.

Source: CoinShares

However, this surge has significantly mellowed down since, with the latest CoinShares report noting weekly fund inflows at $88 million for the week ending 10 December. It added that some providers saw outflows representing as much as 11% of assets under management (AUM), while others saw inflows of almost 14% of their total AUM. It further noted,

“Suggesting extremely polarised opinion amongst investors, with some panic selling during this most recent price decline, while others seeing it as a buying opportunity… All the panic selling was focused on Bitcoin last week.”

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