Crypto Funds Explode in 2018 as Venture Capital Attacks the ICO Model

Blockchain technology and cryptocurrencies have become a prime target for forward-leaning hedge funds, venture capitalists, and private equity firms in 2018 as the crypto ecosystem rapidly matures.

While crypto funds may have experienced a rocky start to the year, with nine funds shutting down amidst a 48% nosedive in net returns across all cryptocurrency programs in the Barclays database, crypto funds have experienced a strong rebound with a 48% positive shift in April onwards.

The amount of tools available to market professionals within the crypto market is still limited, leading to the creation of funds that unite the capital of both market newcomers and professionals.

The highly volatile and lucrative nature of the crypto market led to the development of adaptive financial institutions that focus on the cryptocurrency market, such as crypto-specific funds.

Hedge funds account for roughly 65% of all cryptocurrency funds, with a further 32% driven by venture capital.

Private equity firms hold just 3% of the total assets managed by crypto funds.

Interestingly, crypto funds that invest directly into promising blockchain platform appear to avoid index funds or value transfer driven tokens and gravitate toward projects that demonstrate a clear use case or innovative tech stack.

HyperChain, Kenetic Capital, Signum Capital, and Pantera Capital have all invested heavily in OmiseGo, with other projects such as Zilliqa, Ontology, ICON, Merculet, and 0x frequently invested in by crypto funds.

While hedge funds investing directly into cryptocurrencies accounts for over 40% of all crypto funds, more than 25% of all funds target promising and innovative blockchain platforms, operating as classical venture investors.

The development of hybridized blockchain incubator/accelerator programs such as those created by Huobi, IBM, and Blockchain Space proves that the ICO model hasn't eliminated traditional venture capital - the advent of the ICO model has only forced them to adapt.