The Kinesis blog contains posts made by our team regarding to, gold, blockchain, technology, precious metals, security as well as interviews conducted.
50 Years Without a Gold Standard: fiat currency post-Bretton Woods Agreement, as discussed in Rickards’ book: “The New Case for Gold” Yesterday, Sunday, August 15th, marked a significant time stamp in the history books, as 50 years since the fall of the Bretton Woods Agreement and gold-backed US currency. The Agreement of 1944 was the beginning of a foreign exchange system that promoted economic growth on an international scale, forged as a safe-guard against the devaluation of the dollar (USD). Perhaps more importantly, the resulting social cohesion among independent states after WWII was vital for stabilising market volatility on a wider scale. However, this came with the caveat that all participating countries would peg the respective value of their currencies to the dollar. Considering the importance of the Agreement retrospectively, the global reliance and exchange of the dollar have largely contributed to its existence as a major currency, currently involved in over 80% of all foreign exchange transactions. With an end to the Bretton Woods Agreement in 1971 during Nixon’s presidential campaign, foreign currencies became free-floating on the foreign exchange market, as was the case for larger economies like Great Britain, Japan and the US. Without the ability for the American citizens to claim gold as before, investors looked for private intermediaries to house their gold or to participate in high-risk strategies like Exchange-traded funds (ETFs). The New Case for Gold Despite the eradication of the gold standard in 1971, it is clear that the enduring value of this precious metal persists today. Bestselling author on matters of finance and precious metals James Rickards explores this momentous event in “The New Case for Gold” as well as debunking age-old myths that surround it. According to him, the process of separating gold from the dollar confirmed rather than undermined gold as a lucrative asset for preserving value. Whether that value is intrinsic or subjective, humanity’s usage of gold as a currency throughout time can be pinned to its pre-requisite properties of “scarcity, malleability, inertness, durability, and uniformity.” His title recognises the renewed importance of monetary systems based on gold, saying: “In the absence of an official gold standard, individuals should go on a personal gold standard by buying gold to preserve their wealth” While the rationale behind a personal gold standard is varied, this pursuit entails low-risk investment in a stable asset that can provide a safe-guard against inflationary threats. In times of global crises, investors look to gold as a “safe haven”, since it is an asset increasing in value rather than depreciating. The Future of Gold Post Bretton Woods Agreement, it is certain that the future of money is digital. Clearly, the move towards decentralized digital asset management is becoming a widespread reality for those seeking to diversify their portfolio. As central banks follow suit with digital currencies set to represent fiat, the direction towards digital rather than paper money is already well underway. As Rickards mentions in an interview about his new release, the answer of a digital gold-backed currency with an accompanying debit card to spend owned gold would bring back a new kind of gold standard. Making gold a spendable asset, rather than a hoarded one, enables its circulation in the wider economy. This means that gold can be defined as money in terms of a store of value but also a medium of exchange and unit of account. A New Bretton Woods Agreement Going forward, the future of gold and gold-backed currency is already in progress. However, whether the gold standard will be introduced to currency on a global scale is another matter. One of the reasons the Agreement fell was the great undervaluing of the price of gold, which meant that gold production would not be sufficient to provide the resources to finance the growth of global trade. However, as Rickards highlights, when gold is priced on an analytical, not political basis, this enables its sustainable endurance as a form of money. The Kinesis Solution At the time of speaking, he notes that gold was historically a non-yield producing asset, sitting stagnant in vaulted infrastructure for long periods of time. This made it impractical for daily use and inaccessible as an exchangeable asset. However, the Kinesis system participants can not only store their gold with zero fees but can also generate a yield, whether it is spent or simply held in a user’s wallet. Rather than a Monetary System built on principles of risk or debt, yields are acquired from mutual transaction fees drawn from the entire Kinesis ecosystem. Whether the future monetary policy will mimic the principles of the Bretton Woods Agreement is uncertain, but a global want for fair and ethical monetary systems is without question.
One of the latest digital trends to emerge from the crypto-universe, NFTs are ‘Non-Fungible Tokens’. However, you’d be forgiven if that explanation left you with more questions than answers. Questions around what they do, how they can be acquired and why some individuals are paying millions of dollars for them? Before these questions can be answered, we first need a concrete understanding of an NFT’s meaning. “Fungible” - a common term in economics - simply means “replaceable”. The easiest example of a fungible object is money, which can be readily exchanged for any currency of equivalent value. Another example could be a line of mass-produced trainers, all made to be identical in look and quality. When we think of non-fungible objects, we typically think of works of art. Something made entirely singular and unique. But it could also include a pair of the aforementioned trainers if they had then been signed by a celebrity athlete or had someone’s initials added to them. It’s this uniqueness - through either creative, cultural or personal value - that makes an object non-fungible. For those who have dealt in cryptocurrency, ‘token’ will be a familiar term. While cryptocurrencies on the blockchain have fungible tokens, making them replaceable and easily exchanged, NFTs are represented by a unique NFT crypto token. This means they can be used as proof of ownership of an individual and exclusive asset - with works of digital art being the most common so far. How do NFTs work? While the transfer and ownership of NFTs are identical to that of any cryptocurrency on a blockchain, they do have a key difference. This is a distinct digital signature that means it can’t be directly interchanged with another token. Although an NFT will include this digital signature to make it unique on the blockchain, creators could still offer multiple of a single asset. Much like a limited retail release, these could be fifty copies of a single album or one of the hundreds of trading cards. NFTs do also have an additional feature over regular cryptocurrency for the benefit of creatives and artists looking to sell their work as an NFT. They can be paid royalties every time their work is either purchased or exchanged at a royalty rate that matches their needs. This can empower digital artists to start enjoying a larger stake in their success, which many have felt cut out from - particularly on music platforms like Spotify. This connection between creator and consumer reveals part of the reason why some NFTs are selling for such great amounts. However, there is still more to understand about some of the prices seen on NFT marketplaces. Why are NFTs valuable? There have already been numerous articles detailing some of the highlights of NFT exchanges. Not just on their staggering price tags but also some of the surprising items that are being put up for sale in the first place. From Jack Dorsey auctioning off Twitter’s first tweet to highlights of NBA matches, it seems like any digital asset you can conceive of is being bought and sold. But with digital files like photos and videos being easily copied and downloaded, it’s easy to be left wondering why NFTs have any value in the first place. While some NFTs are being auctioned with their proceeds going to charity, others purely offer an opportunity for fans of content creators to support them directly. A lucrative market built around valuation and speculation has also emerged, further attracting hedge funds and investors into cryptocurrencies. Some say that NFTs are a natural progression for the fine art market. A new playground for the wealthy to buy and sell digital assets they simply want to own or will sell for a sizable return in the future. It can be argued that it’s blockchain technology itself that piques and satisfies a desire to be recognised as the singular owner of an object. With blockchains being a public ledger that is verified by countless computers across the world, they can become galleries that permanently display ownership of an exclusive asset for all the world to see. This is perhaps even more true of NFTs sold directly by celebrities. Imagine your direct interaction with a personal hero, forever being captured on the blockchain. How can you get NFTs? Although some feel that the NFT bubble might have already burst, NFTs have opened new ways in both supporting artists and changing how we exchange goods. Connections between the physical world and the more abstract realm of NFTs are already being patented. With how quickly cryptocurrencies were adopted across global markets, it appears likely that many of us will look to buy NFTs soon. While any blockchain can design its version of NFTs, they are almost exclusively traded on the Ethereum blockchain. So to participate in auctions and purchase them, you will need to have ETH available in your wallet. Currently, several popular websites perform as retailers and auction houses for NFTs, such as OpenSea, Mintable, Foundation and more. With straightforward and standard transactions, you only need to browse, bid and buy at your leisure.
ASIC mining has remained the most efficient method of acquiring cryptocurrency for years. Is it worth investing in today? Short for Application-Specific Integrated Circuit, an ASIC miner - unlike other mining setups that repurpose CPUs, graphics cards or even disk storage - has been manufactured for the sole purpose of mining cryptocurrency. Offering the greatest leap in efficiency and simplicity since Canaan's first ASIC miner in 2013, many manufacturers have entered into the technological race of producing the most efficient ASIC rigs. Now, those who are serious about crypto-mining enjoy a wealth of choices when selecting their ASIC miner. The catch to ASIC units compared to their predecessors is that they can only mine a single crypto hash algorithm. This means that they will only be able to mine cryptocurrencies locked to that algorithm, which could be just one or several. Initially seen as an investment only available for those with extensive funds, ASIC rigs have become affordable and viable for smaller investors. With knowledge and interest in cryptocurrencies growing amongst even the tech-illiterate, more individuals are wondering whether ASIC mining is worth pursuing. What companies are involved with ASIC mining? ASIC rigs were first mass-produced in 2013, following the launch of Canaan's Avalon V1. This ASIC bitcoin miner could acquire upwards of $200 a day in Bitcoin. Although today, the ASIC landscape is significantly different. With explosions in profitability driven by increased valuations in cryptocurrencies, competition has erupted between manufacturers to produce the most efficient ASIC rigs. Whilst Canaan is still a significant player within the industry - even recently investing into their own mining farm in Kazakhstan - there are now many competitors driving advancements in ASIC miners. Bitmain, Whatsminer and Bitfury are just some of the now recognisable brands producing the most in-demand ASIC miners. However, it’s not just ASIC manufacturers which have turned into multi-billion dollar enterprises. Entire companies have been created to invest in ASIC mining farms and bring together thousands of rigs into a single location to mine cryptocurrencies 24/7 at a massive scale. These include the likes of Riot Blockchain, Marathon Patent Group and HIVE Blockchain - all of which have enjoyed substantial growth in recent years, capitalising on the significant increase in Bitcoin and Ethereum value. What are the pros and cons of ASIC mining? Now, from the above, you’d be forgiven for thinking ASIC mining was the only real consideration for any individual or group looking to start crypto-mining. However, the drawbacks of ASIC can range from mild to rather significant depending on where your operation is based and how much you’re able to invest in terms of funds, space and time. In very general terms, the more you can invest in an ASIC mining rig, the greater the profit you’ll be able to yield. While this has always been the case for crypto-mining, the principle has never been more true than now. As mining grows more popular, the time taken to validate transactions on the blockchain is ever-increasing - this serves to tackle uncontrollable inflation within the currency. Unsurprisingly, the ASIC miners with the greatest hash power to validate these blockchain transitions are the most expensive. A top of the market ASIC miner like Bitmain’s Antminer S19 PRO would set you back between $8,000 to $10,000, if not more. That is a tremendous investment for someone with no experience or background in mining to make. Plus, that doesn’t account for the sizable electricity costs required to keep it running. Naturally, you don’t have to go for one of these premium models. In fact, you don’t even have to buy new - especially with China’s recent ban on crypto-mining leading to swathes of units being auctioned off on second-hand markets on eBay and Amazon. These can be especially inviting if they’re sold alongside their required power supply, offering further savings. This means there is an abundance of ASIC mining hardware to match any budget. For a relatively modest $400, you could pick up Antminer S9. With just enough profitability to keep you in the red, this would be a perfect starter miner for someone looking to become more familiar with mining without losing money on the rig. However, such small profits can be quickly consumed by how much you have to pay for electricity. Even just a small increase in kilowatt per hour can turn a profitable rig into a lossmaker. This naturally means those with access to a surplus of renewable energy have a distinct advantage. As an inexpensive alternative, it will substantially reduce - or completely eliminate - the sizable electrical bill that comes with mining. With the limits of improved hash rates already being seen, it’s predicted that the next race for mining cryptocurrency will be who can achieve the greatest energy efficiency. For larger enterprises, establishing an ASIC farm in the desert driven by electricity from solar panels is a feasible proposition. For smaller startups and individuals, however, commercial access to that amount of renewable energy would be a more difficult acquisition. There is also the previously mentioned limitation on the currency that can be mined from each rig. While the simplicity of ASIC mining is unparalleled - plug in, log in, connect your wallet and away you go - the volatility of your chosen currency could make your profitable rig into a financial burden overnight. Currently, this is the case with Ethereum ASIC mining hardware. With the switch to Ethereum 2.0 and its ‘Proof of Stake’ concept, mining the currency will no longer be possible in a couple of years. This will lead many to reconsider investing in any costly Ethereum miners. While it may seem that ASIC mining is better suited to larger enterprises, it does offer a few advantages to individuals looking to earn some passive income. Given their compact size, you could easily house several ASIC units in a modest apartment. However, be warned. You will have to find an effective way to exhaust the heat, as even a single ASIC miner will begin to push the temperatures up in the room it’s working in. The more we explore the ups and downs of ASIC mining, the more difficult it becomes to give a reliable answer on whether it’s the right mining solution for you. Another popular alternative on the mining market presents itself in the form of GPU mining. In this article, we’ll help you to understand how GPUs are used in mining rigs and how you can mine effectively with them. However, with preparation and the right resources, ASIC mining still remains the most profitable form of crypto-mining.
Yield farming has recently become a more popular way to earn cryptocurrency, but is it really possible to earn high farm yields from DeFi platforms? Part of the attraction of decentralized finance (DeFi) systems is that any individual can get involved in investing, lending and borrowing cryptocurrency. With no institutions or banks controlling the distribution of currencies, anyone with the knowledge and understanding of DeFi systems can earn significant interest and profits within various cryptocurrencies. This freedom to lend and borrow as part of decentralized exchanges, as well as the release of tokens by DeFi platforms onto the market in 2020, has led to a growth in the popularity of yield farming. Although some report to earn huge profits from this process, others have put large investments into various crypto assets, only to return significant losses. So what exactly is yield farming and how do you grow crypto profits from your investments? What is yield farming? Simply put, yield farming is a method through which investors can earn interest on their digital assets. By lending their own cryptocurrency back into DeFi protocols or platforms, investors provide liquidity to the market and are rewarded by earning interest back on their investment. Plus, DeFi platforms and protocols have also started to reward investors with their own governance ‘tokens’. These tokens are the equivalent of a shareholding in a traditional finance system and enable owners to debate, propose and vote on how the protocol is used and changed. One example is COMP tokens, which are released by the Ethereum-based protocol Compound and allow owners to have a say in how the protocol is run. Through a combination of these tokens and interest, yield farmers can start to earn a real profit from their cryptocurrency investments. How does yield farming work? In its simplest form, yield farming is the equivalent process of lending and borrowing in the traditional finance system, without any controls being placed on interest rates or loan applications by central banks or institutions. However, there are particular DeFi systems in place that enable efficient and effective decentralized exchanges. At the base of yield farming (and many other types of exchanges) are liquidity pools. This is where investors lock their tokens and assets into a pool via smart contracts. These assets can be traded and lent out to other users, sometimes using algorithms to determine the distribution and price, while yield farmers earn interest back on their investment. As well as having many different cryptocurrencies that are farmed for their yields, there are many different liquidity and platforms for each type of digital asset. This means there are lots of options for investors based on the types of digital assets they want to trade. What is DeFi Yield Protocol? One of the central policies of DeFi is that lending, borrowing and trading of digital assets should be open to everyone. The DeFi Yield Protocol (DYP) is quickly becoming a central part of the DeFi ecosystem thanks to its ability to open up crypto trading to a range of investors and lenders. By using a range of decentralized DYP tools, users can provide liquidity to the market by investing their tools into the platform to receive rewards in ethereum (ETH), binance (BNB) or DYP coin. The system automatically converts DYP into ETH or BNB without significantly affecting the price, enabling yield farms to earn significant profits from their investments. How do you farm DeFi tokens? As well as investing your own crypto assets into platforms or liquidity pools to earn interest, yield farmers can also earn DeFi tokens through this process. These tokens are a valuable asset in themselves and, in the case of pool tokens, can be earned and retraded to return even higher profits. These pool tokens are tradeable across lots of different pools and platforms such as Compound or Uniswap. As part of increasingly complex lending chains, yield farmers can earn pool tokens and then put them into the same or different pools or platforms in order to earn more tokens or interest. Although these strategies can be highly profitable, they can quickly become complicated and unwieldy if an investor doesn’t take a logical, well-informed approach. How to buy Yield Coin (YLD) As well as earning tokens through the investment of crypto assets, certain tokens are available to purchase individually, such as YLD tokens. With their own inherent value, YLD tokens are linked to investments in over 1000 different projects and companies. Established on the ethereum blockchain, they can be bought and traded through Yield.App to earn significant interest rates. This is a straightforward way to earn passive income from crypto assets without needing to actively trade currency or establish a chain of earning and trading tokens. How do you make money with DeFi? Many potential investors may wonder what yield farming strategies are the most profitable and effective. The short answer is, it’s dependent on how much asset and time investment you’re prepared to put into yield farming. Although some high-risk strategies promise significant returns, these often require an in-depth understanding of DeFi platforms, protocols and complex chains of investments to be most effective. If you’re an investor looking to earn some passive income without making too much investment, then you might consider putting some of your cryptocurrency into a trusted platform or liquidity pool and see how much it earns. Once you’ve established this base and gained confidence, you may look to invest elsewhere or even purchase tokens directly. As with any digital asset investment, you get out what you put into it. So ensure you have a thorough understanding of any protocol or platform before you invest and ensure any strategy you build matches the amount of currency and time you’re prepared to input into yield farming.is-yield-farming-profitable
Find out more about cryptocurrency arbitrage trading methods, as well as the potential rewards and barriers. Visit Kinesis, and you’ll see one Bitcoin priced for 35,904.20 USD. Visit another crypto exchange, and perhaps you’ll see a slight variation of a few cents or dollars. This is no mistake; it’s natural that different markets’ crypto evaluations would vary based on their liquidity and user base, as well as general trading volatility. Arbitrage traders capitalise on the value misalignment by buying cryptocurrency at the lower price and selling it for the higher. How arbitrage trading works Are you having a hard time wrapping your head around arbitrage? Real-world examples occur all the time. An antique dealer finds a chair for 10.00 USD at a garage sale and sells it for 90.00 USD at an auction. A vendor buys cherries from a rural supplier and charges double at an upscale city market. Arbitrage traders apply this same philosophy to buying and selling financial assets, ranging from Bitcoin to bonds. However, just because anyone can theoretically arbitrage almost all currencies or financial instruments doesn’t mean there are equal chances of success for all assets. Arbitrage and risk arbitrage are well-known trading techniques, particularly within traditional markets. Large financial institutions utilise advanced bots to automatically arbitrage stocks and similar securities, minimising opportunities for independent traders to compete. As a newer commodity that only recently captured large brokerages’ attention, Bitcoin and other decentralized finance present traders with increasing opportunities to retail arbitrage for profit. Why cryptocurrency is optimal for arbitrage trading There are 1,100+ crypto exchanges representing diverse levels of sophistication, liquidity, and trustworthiness. The continuous, dramatic fluctuations in crypto prices naturally lead to many of these markets reporting different values for the same currency. Geography also determines the local value of international commodities. For example, Bitcoin is worth substantially more in South Korean markets. During times of turmoil, Argentinian and Hong Kong exchanges traded Bitcoin at premium rates. Types of crypto arbitrage trading There are numerous approaches to arbitrage trading, though common themes and end goals remain the same. While traders will always pursue new ways to leverage market data for revenue, below are some of the most popular cryptocurrency arbitrage techniques. Simple arbitrage Also known as “cross-market arbitrage” and “spatial arbitrage,” this straightforward strategy involves buying a cryptocurrency on one exchange and simultaneously selling it on another. Let’s say Kinesis Exchange prices Litecoin at 130.57 USD, but another exchange says it’s worth 130.59 USD. You could buy $10,000 worth of Litecoin on Kinesis Exchange and sell the same amount elsewhere to make an immediate $200 profit. Triangular arbitrage As suggested by the name, this type of arbitrage trade involves three different currencies (or two pairs). The goal is to leverage divergences between how different markets appraise and convert other currencies. For example: An arbitrage trader buys one Bitcoin for 33,000 USD and then uses this Bitcoin to buy 100,000 Stellar Lumens—each worth 0.34 USD—profiting 1,000 USD.An arbitrage trader buys one Bitcoin for 33,000 USD but then sells it immediately for 420,000 ZAR (South African rands) due to regionally-based discrepancies. The resulting profit would be 956 USD. Convergent arbitrage This practice involves buying a cryptocurrency when a certain exchange or market undervalues it. The driving assumption is that the asking price will eventually self-correct, letting the trader later sell the currency for a higher value.Convergent arbitrage can also work in reverse. Let’s say you observe that a crypto exchange prices Bitcoin higher than others. You could short-sell based on the assumption it’s overvalued and will decline.Take note, not all trading platforms allow short-selling of cryptocurrencies. Arbitrage is considered a “low-risk” strategy The likelihood of losing equity while Bitcoin arbitrage trading is low but not absent. What’s more, the dramatic gains-and-losses typical of cryptocurrencies can increase both potential arbitrage risks and rewards. If you’re trading, keep an eye out for the following: Having inadequate time to react, for example if a currency pair is in a different time-zone to your own.A slippage in exchanges.Cryptocurrency exchange site outages.Market unpredictability. Other roadblocks to profit Transfer delays and upfront capital Arbitrage traders may grapple with problematic delays caused by transferring currencies between exchanges. An opportunity to profit may last mere seconds, making any delays costly. In response, arbitrage traders commonly upload multiple currencies to participating exchanges in advance. While this strategy eliminates delays, it requires greater upfront capital and potentially lessens adaptability. After all, it’s common for cryptocurrency exchanges to require you to keep newly invested funds within their platform for multiple days before they’re available for withdrawal. Trade fees and short-term capital gains Many platforms charge a fee for each interaction. The individual transactional costs and withdrawal fees may seem minor but can quickly add up to take a sizable chunk of your profits.Similarly, don’t forget to consider the tax for short-term capital gains. For example, the specific percentage you’ll need to pay in the US depends on your tax bracket and marital status. For instance, a single person who generates $10,000 in short-term profit will pay an estimated 12% in taxes. Time-consuming research and waiting We’ve all heard the saying, “time is money.” With cryptocurrency arbitrage, you risk working long hours for little pay-off. Traders must regularly track multiple exchanges and currencies, stay abreast of breaking news, wait with bated breath, and be prepared to seize the opportune moment in an instant.Traders can supplement some of this legwork with arbitrage trading bots, though this doesn’t entirely eliminate related duties. Hurdles to joining and interacting with different exchanges Most reputable exchanges won’t let you instantly join and trade. In fact, the approval process for an account can take days to complete. You may also have to contend with trading accounts shutting down due to glitches in systems. Popular YouTuber Graham Stephan recorded Why I Cancelled Robinhood, in which he details how the controversial exchange wrongly closed his account for two months. Despite multiple efforts to connect with customer service, he could not touch his money during this entire time. System glitches are not the only barrier you could face as a Bitcoin arbitrage trader. There will be lucrative arbitrage opportunities that you won’t be able to leverage based on citizenship. Above, we mentioned that South Korea tended to price Bitcoin higher than other domestic markets. However, you would have to be a verified citizen to participate in its cryptocurrency exchanges. Stay competitive with arbitrage bots You may have a natural eye for trades and spend hours pouring over crypto news and time series. Yet there’s simply no competing with the rapid computing power of arbitrage bots. Not all coin arbitrage bots are created equal, so it’s essential to research the various cryptocurrency arbitrage app developers. Steer clear of providers who promise unrealistic gains or lack a seasoned track record. These bots might make poor trades, or worse, outright steal your cryptocurrency as part of a scam. Additionally, don’t fall into the trap of “setting and forgetting” your arbitrage cryptocurrency bot. This mistake leaves you out of the loop about your own finances and robs you of valuable learning experiences. Plan for a drop in crypto arbitrage opportunities There’s no denying, cryptocurrency is increasingly becoming mainstream. Financial gurus that previously snubbed crypto now incorporate Bitcoin and Ethereum into their portfolios. Publicly traded companies like Tesla and Square invest heavily in crypto, and top credit cards like MasterCard and Visa embrace Bitcoin. You better believe hedge funds are taking notice. So what does this mean for retail traders employing arbitrage trade strategies? In Crypto Markets Are Where the Fun Is, Matt Levine notes, “Eventually crypto trading will be as competitive as traditional finance, and innovation in crypto markets will be as difficult.” Independent traders may be able to manually execute arbitrage trades in today’s markets. However, they should begin to investigate different arbitrage bots in order to keep up with an evolving crypto economy and statistical arbitrage (stat arb) techniques. Diversify your portfolio with Kinesis for ultimate success The last thing crypto investors should be is discouraged. Mainstream interest is a stepping stone to mainstream adoption, meaning today’s investments could pay off in both the near and distant future. Diversification is arguably the key commandment of smart money management. Balance your short-term-focused arbitrage trading with long-term investments in crypto and precious metals, as well as retirement accounts, like eg. your US employer’s 401K program. Kinesis makes it easy to buy, trade, and spend currencies and commodities with a hardware wallet and Visa card. Secure your digital assets, track collective growth, send money across the globe, and receive regular rewards for spending and storing your money with Kinesis.
Hedge funds are accelerating rapidly in the crypto space. We examine this growing market and its appeals for fund managers worldwide. With the crypto market doubling in value over the last year alone, it’s no surprise that fund managers around the world are taking notice of this growing financial revolution, despite the recent fluctuations. The appeal is clear: an alternative to the traditional banking system, providing new opportunities to market analysts, willing back new coins or startups with seemingly endless potential. However, as with any evolving market, there is a level of risk involved. Crypto is still a volatile product, as we’ve seen with the rapid price fluctuations in the first quarter of 2021 alone. This means that even experienced asset management firms are likely to be investing only a small portion of their fund money into this space. Still, with over $3.6tn assets under management globally, even a small percentage amounts to a healthy crypto investment market. And it’s only continuing to grow, with hedge funds looking to start investing more heavily in Ethereum, Dogecoin, Litecoin and other Bitcoin alternatives in 2021. So, who’s investing, and what’s the appeal for fund managers? Hedge funds investing in cryptocurrency Some of the world’s biggest and most well-known hedge funds are investing in the cryptocurrency market. In April, Brevan Howard — one of the largest funds in Europe — announced its intention to invest, putting 1.5% of its fund in digital assets as an initial step. The company has been involved in this space for a while, having recently acquired a 25% stake in One River Asset Management, an absolute-return strategy focused asset manager, strongly backed by the traditional financial system. One River Asset Management recently made one of the largest trades in the history of digital assets, in partnership with Coinbase, proving its long-term confidence in this asset class going forward. However, they’re not the only ones. This is part of a larger move by institutions, wealth managers and firms like Brevan Howard towards crypto assets, particularly currencies like bitcoin. Goldman Sachs has indicated that it’s looking to move into blockchain-related assets, and in April Morgan Stanley approved indirect bitcoin investments for a handful of its funds. With two of the world’s biggest investment banks declaring their intentions, it seems that cryptocurrency has definitely hit the mainstream. Early adopters are continuing to grow as well. Pantera Capital, which launched the first cryptocurrency hedge fund way back in 2013, noted that its bitcoin fund is up over 82,000% in the seven years since its launch. Performance has been improving steadily for this firm, and with its history of investing in early disruptors, it’s likely to keep going strong with its $4.3bn assets under management. Institutional investors may now be taking notice, but these specialised firms still have an important place in this rapidly expanding space. Increasing hedge funds for cryptocurrency In 2019 there were over 150 crypto hedge funds actively managing over one billion dollars in assets. By the third quarter of 2020, there were more than 800 active funds, and this number is steadily increasing, with constantly improving infrastructure encouraging more funds to invest. Around two-thirds of hedge funds managing crypto launched in 2018 and 2019, with their assets under management more than doubling during these years. In 2021, the appeal is as strong as ever, and early reports by Hedge Fund Research for this year’s overall hedge fund performance indicate one of the strongest year-to-date performances since the 1990s. Advancing in April for the seventh consecutive month, optimism remains high in this asset sphere, which will naturally trickle down into the blockchain fund market. There’s room for growth Of course, one of the most revolutionary aspects of crypto trading is its accessibility to individuals as well as to hedge funds and institutional investors. Trading cryptocurrencies like Bitcoin, Ethereum and digitalised physical gold and silver is possible through apps and exchanges tailored to multipurpose use. And with Kinesis, you can merge the best parts of crypto (its skyrocketing value and current financial focus, for example) with the historically popular gold and silver as a stable asset choice.