Crypto Hedge Funds Gear Up for ‘Token Mania’ After 2023 Rebound

Crypto hedge funds that survived a bruising 2022 are recovering, and many are thriving. Some are even expecting a banner 2024.

Take Dan Morehead’s Pantera Capital, one of the industry’s oldest and biggest funds. The firm’s liquid-token fund was up nearly 80% this year as of mid-December, after falling 80% in 2022, according to a person familiar with the performance. Chainview Capital, the crypto hedge fund run by 31-year-old Dan Slavin, has doubled after an 18% decline last year, Slavin said.

Stoka Global LP, which invests predominately in so-called altcoins, gained 268% this year as of Nov. 30, according to founder Naveen Choudary, who started his career in tech investment banking at Goldman Sachs Group Inc.

While on average funds haven’t matched this year’s more-than 150% rally in Bitcoin, the reversal of fortunes is welcome news for an industry left reeling after FTX’s collapse last year. That failure, combined with a wave of redemptions and difficulty in accessing banking services, contributed to the demise of roughly one-third of all crypto hedge funds. Firms that weathered the storm are now gearing up for an even better 2024, as the price of Bitcoin remains elevated thanks to optimism the US will approve exchange-traded funds that invest directly in the original crypto token.

“It’s looking like there’s going to be another token mania coming,” Slavin said, adding that the mood in the crypto market this year felt a lot like three years ago, when Bitcoin was on the cusp of a breakout that sent it soaring to record highs.

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