Crypto funds are pooled investments wherein multiple investors entrust their capital to fund managers who invest in various digital or crypto assets. These funds have gained recognition as a viable investment option within the cryptocurrency ecosystem.
Recent data suggests a swift growth in their popularity, with the total value of assets under management (AUM) by crypto funds hitting approximately $24 billion in 2020, representing a staggering 100% increase from the previous year.
Background or History of Crypto Funds
The advent of crypto funds dates back to 2013 when Pantera Capital, a US-based investment firm, launched the first digital asset fund. In subsequent years, numerous other entities followed suit, creating their own crypto funds to broaden exposure to this emerging asset class.
Use Cases or Functions of Crypto Funds
Crypto funds serve as investment instruments offering diversified exposure to different cryptocurrencies. This structure caters to investors who lack the knowledge or time to track the volatile cryptocurrency markets. Instead, they entrust the selection and management of digital assets to qualified fund managers.
Impact on the Market, Technology, or Investment Landscape
Crypto funds have significantly altered financial dynamics. They provide a formalized structure to invest in cryptocurrencies, serving as a bridge between traditional investment mechanisms and the new digital asset class. This development has attracted institutional investors, which contribute to the legitimization and growth of the crypto market.
Latest Trends or Innovations in Crypto Funds
The latest innovation in this sphere is the emergence of decentralized finance (DeFi) funds. These funds invest in DeFi projects, yielding a high return potential. These funds have surged in popularity, as depicted by the increasing AUM.
- 2018 AUM: $2.1 billion
- 2019 AUM: $4.2 billion
- 2020 AUM: $24.1 billion
| Year | AUM in Crypto Funds (in billions) |
|---|---|
| 2018 | 2.1 |
| 2019 | 4.2 |
| 2020 | 24.1 |
In conclusion, crypto funds offer an instrumental gateway for traditional and new investors alike to tap into the fortunes of the dynamic cryptocurrency market. As the crypto markets mature and innovate, crypto funds will likely continue to play an essential role in the wider financial framework.
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