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“Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.” - Paul Samuelson |
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In today's issue: Want to invest in crypto but don't know where to get started? This issue is for you.
Today, we take a detailed look at the Best Performing Cryptocurrency Funds for 2023, which should give you some alternative investment ideas. These funds are run by some of the top investment minds in crypto and are worth investigating for ideas on how to build your own crypto portfolio.
For today's newsletter, we've updated and improved our guide to the top crypto investment funds. While some are out of reach for the average individual, others are happy to take on retail investors (that's us). Read on. |
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| | Must Read Today's most important story for crypto investors. |
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Ethereum is almost ready to deploy its Shanghai update, which will allow those with tokens staked on the network to finally withdraw those tokens.
Since 2020, any staked ETH tokens have been locked, but that hasn't stopped investors from depositing nearly $33 billion in ETH to the network.
Currently, the bulk of those funds have been staked through intermediaries like Coinbase and Lido. Anyone with funds staked through those platforms won't have to do anything other than wait.
Lido said it won't be allowing withdrawals of staked ETH until a month after the Shanghai update so it can perform audits and security checks.
Coinbase hasn't made a firm statement regarding withdrawals of staked ETH, but it has said it could take users several months. |
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The Shanghai upgrade is significant as it finishes the transition of ETH to a proof of stake network. However, the shift shouldn't be a meaningful change in the way users interact with Ethereum, nor a change in the network's economics.
As the majority of ETH is staked through intermediaries (with many of those issuing tokens that represent the staked ETH), most of the capital in the Ethereum staking contract has been moving through the crypto ecosystem for a few years.
While little looks to change within Ethereum itself, what's changing is the political climate regarding crypto.
With the SEC getting more active in bringing lawsuits against crypto firms (most recently Coinbase and Binance), there are worries that Ethereum could get caught in the SEC crosshairs.
Notably, on the same day Ethereum transitioned to proof of stake, SEC chair Gary Gensler commented PoS networks could be considered securities offerings due to their reward mechanisms. That all but points a finger directly at ETH. As the second largest crypto by market cap, it makes a tempting target for the SEC.
There's been speculation that once withdrawals are enabled, the SEC could use that as evidence of the fulfillment of a securities arrangement between ETH stakers and the core Ethereum team that implemented the upgrade. |
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Investor takeaway: It seems unbelievable that the SEC might try to shut down the vast Ethereum ecosystem. Still, this story is worth watching, but note that any SEC action would result in years of litigation before a resolution occurred. |
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Best Performing Cryptocurrency Funds for 2023 by Preetam Kaushik |
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Executive Summary: Crypto funds (similar to mutual funds or ETFs) consist of portfolios of digital assets. Since the first bitcoin fund was launched in 2013, over 840 cryptocurrency funds have been established.
Crypto funds experienced unprecedented investor interest at the peak of the crypto market in Q4 2021, with a total AUM of $62.5 billion. They took a big hit in 2022 due to the bear market. The total value of assets held by crypto funds declined by 66% to $20 billion in 2022, and inflows decreased by 95% compared with 2021.
However, there are signs of resurgence as of this writing, with major crypto funds rallying by up to 50%. Crypto Funds Explained
A cryptocurrency fund is a new investment vehicle similar to mutual funds/ETFs. It contains a portfolio of digital tokens and cryptos instead of stocks, indices, or commodities.
In this piece, we’ll highlight the best crypto funds for 2023, with focused recommendations for investors both large and small.
Per Crypto Fund Research, since the first bitcoin fund was launched in 2013, over 840 cryptocurrency funds have been established, and this new market segment of the fund management industry is growing at a frenetic pace.
As cryptocurrencies enjoyed mainstream recognition and acceptance after 2020, investment funds started recording unprecedented investor interest. At its peak in Q4 2021, crypto funds had a total AUM of $62.5 billion perCoinTelegraph.
Those numbers took hard hits in 2022 as the crypto market entered a severe downturn, with major assets like bitcoin and Ethereum falling by 72%. The crash of Terra/Luna and FTX further affected the fortunes of crypto funds that year.
Per CoinShares, the total value of assets held by crypto funds declined by 66% to $20 billion, and inflows decreased by 95% when compared to 2021. However, there are signs of resurgence in 2023, as major crypto fundsrallied by up to 50% in value.
We evaluated several of these top-performing funds for this review. We looked at key performance indicators including their assets under management (AUM), their number of employees, and tenure. The data used was primarily supplied by Crypto Fund List and Crypto Fund Research.
The Best Crypto Funds (2023 Rankings) |
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AUM: $20.8B
Founded in 2013, Grayscale quickly evolved into the world’s largest digital currency asset manager. In 2021, the firm achieved 73.4% coverage of the digital currency market, with a wide range of investment products including single-asset trusts and diversified crypto DeFi funds. At its peak, Grayscale had a total AUM of $43.5 billion. Despite experiencing a decline of over 50% in 2022, this fund remains the single largest crypto asset manager in 2023. (BMJ Score: 4.70) |
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AUM: $3.8B
As the first US-based institutional asset manager to focus exclusively on a blockchain, Pantera Capital has been a pioneer in crypto funds since 2013. Over the years, it has launched four different crypto-focused funds and has led more than 100 out of 210 investments. From $23 million invested in 26 companies, Pantera has realized over $125 million. (BMJ Score: 4.70) |
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AUM: $3B
Originally started as 500 Startups, the Silicon Valley-based, early-stage VC capital firm has a portfolio of over 2,700 firms across 75+ countries. Investing across a wide range of sectors, it has blockchain and crypto startups in its portfolio including BlockCypher and Hijro. As of 2023, 500 Global has funded 51 unicorns (each valued over $1 billion) and more than 140 centaurs (startups individually valued at more than $100 million). (BMJ Score: 4.60) |
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AUM: $2.23B
Launched in 2014, CoinShares is Europe’s first and largest BTC investment fund. It provides diversified exposure to digital assets through several crypto ETFs, ETPs, and other multi-asset portfolios. In 2021, CoinShares International became a public company listed in Sweden. It was also featured on the Nasdaq First North Growth Market. (BMJ Score: 4.0) |
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AUM: $4.56B
a16Z is the abbreviation for Andreessen Horowitz, a well-known Silicon Valley VC firm led by software engineers and entrepreneurs Marc Andreessen and Ben Horowitz. Founded in 2009, a16z launched its dedicated crypto fund in 2018. Since then, the fund has moved aggressively in the crypto bear market, raising $4.5 billion in 2022. In total, a16z has four separate funds investing in digital assets, Web3, and blockchain startups. (BMJ Score: 3.80) |
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AUM: $1.9B
The New York-based investment firm is focused on digital assets and blockchain technology. The firm uses a hybrid hedge fund/VC fund model. Founded by Michael Novogratz, its AUM grew by almost 600% in 2021 during the last crypto bull run. As of 2023, the firm has invested in over 229 companies across the crypto ecosystem, and it's involved in everything from trading to mining, investment banking, asset management, and VC funding. (BMJ Score: 3.0) |
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AUM: $2B
Polychain Capital, founded by Olaf Carlson-Wee (the first employee at Coinbase), seeks to provide investors with "exceptional" returns through active management strategies. The fund invests in digital currencies and not companies. The fund has made investments in over 144 companies including Ava Labs, Coin DCX, and Dfinity. In 2023, Polychain Capital led SPACE ID’s strategic funding round and Cubist Inc’s seed round, which were worth $10 million and $7 million, respectively. (BMJ Score: 3.00) |
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AUM: $2.8B
Founded in 2017 by Kyle Samani, Multicoin Capital is a thesis-driven investment firm in Austin, Texas. It invests primarily in cryptos, tokens, and blockchain startups across Layer 1, Layer 2, infrastructure, enterprise, mobile, and other categories. Notable investments in the Multicoin portfolio include Algorand, Flow, Ethereum, and Lido. (BMJ Score: 2.80) |
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AUM: $1B
This crypto hedge fund seeks to generate capital appreciation while reducing risk. That strategy involves early-stage investments in over 25 crypto projects, automated trading on futures, and discretionary trading on higher liquidity cryptocurrency pairs. Since 2020, Alphabit has made major investments in NFTs, blockchain gaming, and DeFi through startups like Yield, Archax, and GamiFi. (BMJ Score: 2.60) |
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AUM: $600M
AltaIR Capital is an Israel-based venture capital fund founded in 2010 to focus on investments in the technology sector. The fund invests in startups covering FinTech, InsurTech, Blockchain, SaaS, MedTech, AI, Cyber, and Consumer Internet. There are over 300 companies in the Altair portfolio including crypto-focused firms like REGA Risk Sharing, Unifimoney, and Anytype. (BMJ Score: 2.60) |
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AUM: $33M
Part of Altana Wealth, ADCF has been trading in major cryptos in proportion to their market capitalizations. Active since 2014, it's achieved phenomenal success with a combination of long and short strategies, deploying up to 50% of its assets trading cryptos. (BMJ Score: 2.20) |
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AUM: $1B 1Confirmation is an investment fund founded by Nick Tomaino with backing from Peter Thiel, Marc Andreessen, and Mark Cuban. It invests in blockchain startups and digital tokens. Investments have included BTC, ETH, BAT, MakerDAO, and Augur. The fund raised over $125 million in 2021 for crypto startups and digital tokens and followed all this up with another $100 million in 2022 for NFT projects. As of 2023, the fund portfolio has 39 projects including major cryptos, Coinbase, OpenSea, and Nexus Mutual. (BMJ Score: 2.00) |
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AUM: $700M
Founded in 2012 by Jean-Luc Landry and Fred Pye, 3iQ is Canada’s largest digital asset manager. It has multiple fully-regulated, multi-asset crypto investment funds that provide accredited investors with exposure to digital assets like bitcoin, ether, and Litecoin. (BMJ Score: 2.0) |
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AUM: N/A
Founded in 2017, Amentum Investment Management is a hybrid digital currency hedge fund that focuses on blockchain-based protocols and applications. The Florida-based fund has invested in bitcoin, ether, and other tokens, alongside crypto platforms like DexGrid, Connext, and NameBase. As of 2023, Amentum is invested in seven crypto projects including Mattereum and Cent Network. (BMJ Score: 1.90) |
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AUM: $140M
Originally funded by VC firms Andreesen Horowitz and Union Square Ventures, BlockTower Capital is a crypto asset investment firm based in New York. The firm deploys a wide array of strategies, including DeFi yield farming, funding rate capitalization, and more. (BMJ Score: 1.90) |
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Best Crypto Fund for Large Investors
For investors looking at overall consistency, 500 Global is a fantastic choice. Its Global Fund has an incredible track record, nurturing over 50 tech unicorns and over 140 startups valued at over $100 million, but 500 Global isn't a “pure crypto” fund.
If you're looking for a more crypto-focused investing firm, Grayscale is the clear winner. The numbers speak for themselves. With over $20 billion AUM, it's the largest and most respected digital asset investment firm operating globally.
Both these firms only accept investments from accredited investors. These are high net-worth individuals with annual incomes of at least $200,000 for 2+ years. Such an investor also has a net worth of $1 million or more excluding their primary residence, or they have $5 million in assets.
Best Crypto Funds for Smaller Investors
There are plenty of other options aimed at individual investors with more modest holdings. If you want to invest smaller amounts in cryptos and digital tokens, the following are our top picks:
Bitcoin and Crypto ETFs: An exchange-traded fund (ETF) is an investment fund that tracks the value of a particular underlying asset. Usually, the asset is a commodity like gold/oil, a basket selection of stocks, or a major index. You can invest in ETFs as you would in stocks. Buy, sell, hold, and trade them as you please. In a crypto ETF, the fund tracks the price of a crypto (or multiple currencies). Thus, it gives individual investors easier access to cryptos without learning how to open and use bitcoin wallets, etc. You can learn more about crypto ETFs on our Bitcoin ETFs page.
Bitcoin and Crypto Stocks: These days, there are numerous startups active in the blockchain industry. We also feature plenty of publicly traded firms that have strong connections to the crypto markets. The stocks of such companies that benefit from the rise of blockchain and cryptos are called “block stocks.” For investors looking for indirect exposure to crypto, block stocks are interesting choices. To learn more about this topic, visit our Block Stocks page.
Crypto Mutual Fund Alternatives: While we have plenty of crypto ETFs and stocks, mutual funds directly linked to cryptos don’t exist, and the reason is quite simple. Mutual funds have strict regulatory constraints that prevent them from looking at high-risk assets like cryptos. If you want investment options that resemble mutual funds, however, alternatives exist. Apart from ETFs, there are other exchange-traded investment products, crypto hedge funds, and tokenized funds. See our page on Top Crypto Mutual Fund Alternatives. The Best Crypto Fund Alternative: Do It Yourself
The decentralized ethos of blockchain and crypto have always fostered a do-it-yourself spirit. If you're up for some extra learning effort, you can take charge of your crypto investments instead of leaving them in the hands of fund managers. Keep in mind these basic requirements and starting principles:
Think long-term: If you put money in something blindly without adequate research/preparation, it's gambling. Avoid chasing after the next meme coin in search of 100x returns. Plan on buying a handful of high-quality digital assets, then holding onto them for 5+ years.
Pay off your debts first: Before you start investing in high-risk avenues like crypto, clear all your existing short-term loans and debts, especially credit card debts (mortgages and student loans are considered “better” debt as they tend to hold their value or increase your earning potential).
Build a savings cushion: Keep a fund of at least six months’ expenses in case you need it in an emergency. After paying off all debts, start accumulating some savings before even thinking about investing in crypto.
Once you've followed these steps, we can proceed safely to the real step of investing in cryptos. Follow these basic strategies to get off to a smooth start:
- Buy a handful of high-quality digital assets. As the most popular and valuable crypto, bitcoin is a great option for beginners. You can also opt for other altcoins if you want, but try to stick with the top ten coins. They tend to have maximum liquidity and reliability. See our Future Winners Portfolio for our top picks.
- HODL for the long term. Constant trading is not recommended, especially for beginners. Long-term holding (or HODLing) has been the best way to generate excellent returns over time. See our Blockchain Believers Portfolio for the eye-popping returns our crypto investor community has achieved in just a few years.
- Build a portfolio. Consider combining crypto assets with traditional investments like stocks and bonds (we call it the“Blockchain Believers Portfolio”). In this approach, you could potentially outperform traditional investors by simply keeping 10% of your investment in crypto while maintaining 50-60% stocks and 20-30% bonds.
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| | ICYMI In Case You Missed It |
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The results of our Blockchain Believers Portfolio for Q1 2023.
Regulation could be closer than you think.
Unpacking the new Economic Report of the President. (Premium members)
We've updated our popular guide to getting started with staking.
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Bitcoin Market Journal is a daily newsletter that makes you a better crypto investor. It's created by John Hargrave, Nick Marinoff, Steve Walters, Anatol Antonovici, Matthew Du, Daniel Joel, and Preetam Kaushik.
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