According to 21e6 Capital AG, crypto funds generally outperformed the price gains of BTC in previous bull runs, but they ultimately suffered this year from having too much cash on hand and playing it safe.
The classic buy and hold, or hodl, approach to Bitcoin outperformed most crypto funds by 68.8% in the first half (H1) of 2023.
According to data from Switzerland-based investment adviser 21e6 Capital AG, on average, crypto funds generated returns of 15.2% in the first half of 2023, but BTC saw gains of around 84%.
In the report, 21e6 Capital AG’s head of marketing, Maximilian Bruckner, outlined that crypto funds have been “frequently able to significantly outperform Bitcoin in previous bull runs.”
Bruckner attributed much of the underwhelming performance of crypto funds in 2023 to the challenging market conditions and the significant amount of cash they had on hand in late 2022.
Following the implosion of FTX and other crypto projects in 2022, the report suggested that many crypto funds opted to take risk off the table and develop cash buffers, therefore missing out on a significant BTC price rally in H1 of 2023.
“Funds with large cash positions will underperform Bitcoin in a bull market, unless the funds’ assets perform significantly better than Bitcoin.”
“Due to the general sentiment left behind by the end of 2022, many funds had larger-than-normal cash positions. Furthermore, most major altcoins also underperformed Bitcoin – a tough environment for funds,” the report adds.
At the time of writing, BTC is priced at roughly $29,000, and it continues to struggle to hold above the $30,000 level, which has only been briefly surpassed on a couple of occasions in 2023.
Despite this, current prices mark a 75% price gain for the asset since Jan. 1, as per CoinGecko data.
“All crypto fund strategies achieved positive results this year. But relative to Bitcoin, they underperformed, especially those with significant exposure to altcoins, to futures, or those strongly dependent on momentum signals.”
“Going forward, we are keeping a close eye on which exchanges will establish themselves as leading futures providers. Furthermore, the level of the funding rates in crypto futures markets and the ability of quantitative funds to capture trends will be areas of focus when we observe the markets,” the report adds.
Ultimately the report highlighted that investor sentiment has slightly improved over H1 2023, suggesting that some funds may soon start piling in more cash into the crypto sector.
However, it did note that current data relating to inflows and outflows indicate that a “full recovery of sentiment” has not yet taken place.
Non-direction crypto fund strategy comparison H1 2023. Source: 21e6 Capital AG