Introduction: “this year left behind bitcoin positions of hedge funds only this one performance loss rate generally above 50%, now below $4000 on the occasion of bitcoin, accountability pressure they are encountering more and more LP, and even individual large LP plans to invest will share redemption (including stocks, bonds, gold and other financial the amount of investment), as a punishment.”
At 20:45 on November 26th, bitcoin transaction price of around $4043.3, barely recovered $4000 mark integer, but in the past 7 days bitcoin prices fell more than $1700, still more than 30% decline.
“Fortunately, we rush in bitcoins last week before the crash, has been clearing all encrypted digital currency positions.” An American hedge fund manager Xue Gang (a pseudonym) told reporters in twenty-first Century economic report. However, bitcoin fell so fast, still let him.
In November 25th, according to Xue Gang, many long held positions in the encrypted digital currency bitcoin investment fund net fell more than 80%, intensive accountability is experiencing numerous LP.
In the view of encryption digital currency strategist at eToro Mati Greenspan research institutions, including Xue Gang and other hedge fund collective selling bitcoin is a departure, behind bitcoin this round of market crash.
“The current retail investors suffered heavy losses, almost no willingness to market dips, even institutional investors such as hedge funds now have abandoned, bitcoin can not encounter crash.” Mati Greenspan pointed out to reporters.
Xue Gang admitted that this hedge fund collective abandoned bitcoins also upset because they found that retail investors admission investment will drop, regulators and delay in the release of bitcoin financial innovation brings arbitrage opportunities, making bitcoin trading profits increasingly lose value.
“Like many hedge funds, our internal bitcoin has three investment criteria, one is in the short term, bitcoin is difficult to become a world currency; two is the lack of practical application scenarios widely before bitcoin valuation is high; the three is the current capital drive is a key force support bitcoin valuation once, all capital leave, bitcoin prices will drop.” He just said, this is the mid 11 months when they found each capital departure signs become apparent when one of the basic reasons for prompt settlement of bitcoin positions.
“But, from this year, bitcoin continued to drop process retreats fund investment project which is one of the few hedge funds in recent years fell to the worst.” Xue gang bluntly.
From darling to pariah
In Xue Gang’s view, this round of rapid bitcoin crash, is a digital encryption currency to strengthen supervision, BCH surface (bitcoin cash) caused by the hard currency circle bifurcation, constant internal friction and other factors, but they reflect the deep-seated reasons, is a large number of funds and retail investors on a high degree of “consistent”, to support the admission the falsely high price of bitcoin.
He said a year ago, hedge funds launched a bitcoin digital encryption currency investment boom, when many hedge funds see bitcoin money effect and hedge asset characteristics, on the other hand, think more and more block chain technology applications landing will continue to improve the bitcoin demand, and therefore have a lot of money to invest in bitcoin.
For example, for 15 consecutive years, the market outperformed the S & P bold investment Amazon and Google for Bill Miller publicly revealed the legendary investor MVP’s 1 hedge fund about half of assets to invest in bitcoin. “We are at that time will be 8% of the fund assets to invest in other encryption currency bitcoin assets.” He just said, it will also be a lot of peers when they deemed “too conservative”, because many hedge funds have set up encrypted digital currency trading team, launched the encrypted digital monetary fund products specifically to raise a lot of money.
According to Autonomous Next statistics show that as of this year 2 month, the number of hedge fund investment focus crypto currency more than 230, than in the past 6 months doubled, is 5 times of the early 2017, total assets under management of more than 50 billion dollars.
“Now, these hedge funds have become the collective selling daring vanguard bitcoin stop out.” Xue Gang said. The reason for the encryption of digital currency investment funds increased significantly behind the hedge fund with offbeat arbitrage abacus, on one hand they believe blockchain increasingly mature technology will drive the bitcoin demand increases, on the other hand they prefer Europe and the United States financial regulatory authorities will release bitcoin encrypted digital currency assets of financial innovation, great the buy up arbitrage opportunities. For example, hedge funds have done calculations, once the European financial regulators to relax the bitcoin ETF issue, is expected to make bitcoin prices rose to $25 thousand.
However, the hedge fund arbitrage ultimately failed to deliver the abacus. Since March this year, the national financial regulatory authorities in Europe and the United States will not allow bitcoin ETF listed, but bitcoin digital encryption currency financial derivatives innovation take an increasingly stringent regulatory attitude, resulting in bitcoin prices continued to fall and a large number of retail investors wait-and-see.
Recently, the UK financial conduct authority (Financial Conduct Authority, referred to as FCA) strategy and competitive executive member Christopher Woolard warned: “retail investors are selling derivatives exchange tokens based on these derivatives, usually with a lever is complex and volatile, we are concerned about…… In view of this, FCA will prohibit the sale to retail investors for specific types of encryption of monetary assets (e.g. exchange tokens) derivatives (including CFDs, options, futures and negotiable securities) for consultation.”
“This year, in addition to the April rally that bitcoin digital currency net encryption portfolio rebounded more than 30%, in the rest of this investment portfolio in net worth fell sharply, so that more and more hedge fund arbitrage opportunities become elusive feeling.” Xue Gang said, in June a number of encrypted digital currency investment fund of more than 20%, the net loss at retail investors will continue to offer admission reduced circumstances, choose early liquidation leave. This also led to more and more hedge funds stop went away.
Mati Greenspan told reporters bluntly, since this wave of hedge funds still did not stop, stop a tide of investment because of hedge funds usually encrypted digital currency set of lock up period of one year, now the end of the lock up period, they saw the arbitrage opportunity has not come, have decided to stop a bitcoin position leave the hedge, and even many hedge funds to establish a large number of short the hedge positions in the bitcoin futures market risk positions.
This is one reason why the recent bitcoin price decline so fast.
However, the exchange “mistakes” exacerbated the sell-off of hedge funds.
In November 14th, OKEx platform of the BCH futures contract suddenly appeared ahead of delivery, the transaction price is not in accordance with the spot price, but according to each contract the last transaction price, because the transaction price is lower than the spot price hundreds of dollars, many hedge funds suffered losses of delivery amount. A total of more than $400 million in single market explosion.
“I heard that 5’s digital encryption currency investment fund suffered because of the unfair treatment in OKEx futures delivery process, is preparing to submit a complaint to the local financial supervision department.” Mati Greenspan said, in addition he heard of bitcoin market day cumulative amount of more than $400 million cash explosion, resulting in a large number of retail investors eager to leave. He said, now most hedge fund idea is very simple, the encrypted digital currency market the rapid withdrawal of the lack of supervision, the transaction fairness and transparency is not high.
Out of those few
The reporter learned that, with bitcoin prices continued rapid drop, many hedge funds suffered Nintaus drain dilemma.
To set up in December last year bitcoin investment trust fund Grayscale Investment as an example, when the encrypted digital currency investment fund by 2 times the market price to buy bitcoin (cash costs about $40 thousand today), in accordance with the bitcoin transaction price of $4000 is calculated, the net loss rate of close to 90%.
“This is not the case.” Genesis Trading CEO Michael Moro told reporters that this year left behind bitcoin positions of hedge funds only this one performance loss rate generally above 50%, now below $4000 on the occasion of bitcoin, accountability pressure they are encountering more and more LP, even a large LP don’t intend to all investment share redemption (including stocks, bonds, gold and other financial products, investment amount) as a punishment.
This leads to some hedge funds had knowingly inflated bitcoin valuations, also behind bitcoin, hoping to attract a new retail disk access admission funds reduce their loss.
6 months, the New York hedge fund Tetras Capital responsible person has been suggested to obtain a relatively objective investment income by selling the etheric coins, buy up bitcoin, because he believed in the encrypted digital currency bitcoin has only “value”, for example, can be used as a safe haven asset allocation in the financial market turmoil when.
However, the reality is just the opposite.” Xue Gang said, with the 9 month release of the Fed rate hike signal to continue hawkish U.S. bond yields rose rapidly, more and more hedge funds but abandon unprofitable bitcoin, to invest in safety and income both higher U.S. debt. In mid October, U.S. stocks fell to volatility in the market worried about the U.S. economic growth cycle peaked since the “abandoned currency investment bonds” trend has become increasingly evident, resulting in the past two weeks hold bitcoin positions of hedge fund performance extra fell about 3-4 percentage points.
“Now many hedge funds are speeding up clearing bitcoin positions, although they believe that in the short term bitcoin oversold rebound opportunities, but the high volatility in the price of bitcoin so that they are worried about their investment losses will fall into the vortex.” Michael Moro analysis. If the net value of the fund volatility can not be dropped, they will face greater accountability and redemption pressure LP.
(source: the 21 century economic report)