The scale of cryptocurrency hedging fund assets has surged, with family offices and high-net-worth individuals becoming the main investors.

A recent survey report revealed the current development status of cryptocurrency hedging funds. According to the data, the asset management scale of these funds experienced significant growth in 2019, jumping from $1 billion at the end of 2018 to $2 billion.

In the overall performance of 2019, fully delegated long funds stood out the most, with an average return of 42%. It is worth noting that family offices and high-net-worth individuals became the main sources of investment for these funds, accounting for 48% and 42% respectively.

An industry expert stated: "Since the outbreak of the COVID-19 pandemic, we have observed a broader trend in people's interest in cryptocurrency."

Surveys show that there are currently about 150 active encryption hedging funds, of which 63% were established in 2018 or 2019. The establishment time of the funds is highly correlated with the price trend of Bitcoin, and the surge in Bitcoin prices in 2018 became an important factor driving the establishment of cryptocurrency funds.

These funds mainly adopt four investment strategies: full discretionary long, full discretionary long/short, quantitative investment, and multi-strategy combinations. Among them, quantitative funds are the most common, accounting for nearly half of the market share.

From the perspective of the composition of investors, family investment institutions and high-net-worth individual investors account for nearly 90% of all investors. In contrast, pension funds, foundations, and endowment funds have very low participation in cryptocurrency investments. The investment proportion of traditional venture capital funds and funds of funds in this field is also relatively small.

The scale distribution of these encryption hedging funds shows a clear Matthew effect, where a small number of large funds manage the majority of assets, while most funds are relatively small. In 2019, the proportion of encryption hedging funds with assets under management exceeding $20 million increased from 19% in 2018 to 35%.

In terms of performance, the median return of crypto Hedging funds reached 74% in 2019, while in 2018, many poorly performing funds were forced to close due to a sharp market decline. Classified by different investment strategies, fully managed long-only funds performed the best in 2019, with a median return of 40%.

With the development of the cryptocurrency derivatives market, the investment tools and strategies of crypto hedging funds have become increasingly complex. More than half of the surveyed funds reported using derivatives, and about one-third of the funds are involved in futures and options trading. In terms of leveraged trading, 56% of funds were allowed to use leverage in 2020, but the actual active usage rate was only 19%.

Overall, encryption hedging funds play a role in reducing volatility in the market, rather than purely pursuing high returns. As the market continues to mature, it is expected that more regulated encryption derivatives will emerge in the future, which may attract more funds to participate in this field.