It seems the cryptocurrency hedge fund honeymoon is over. After a stellar 2017, revenue appears to have dwindled significantly. Recent reports indicate that the losing trend of these firms continued through May 2018.
Pantera Down by 26 Percent and Crypto Prices Continue to Decline
According to Dan Morehead, Bitcoin, the number one cryptocurrency, performed better than his hedge fund in May 2018. Morehead is the Chief Executive Officer of Pantera Capital, a cryptocurrency hedge fund company.
In a letter to the fund’s investors on June 19, Morehead said, Pantera declined by 26 percent in May. This dip is in contrast to the April surge that was about 50 percent. In total, the Pantera CEO said that the fund is down by 51 percent since the start of 2018. When compared with BTC, it appears the cryptocurrency fared significantly better. BTC prices dropped by only 15 percent in May 2018.
Diversified Cryptocurrency Investment Portfolio Turning out to be a Problem
Having a diversified portfolio is an age-old investment advice. The logic is that by holding stakes in different assets, a trader can hedge losses in one asset with the gains in other assets. It is supposed to be a safe investment strategy. However, based on the situation with Pantera, portfolio diversification might not be such a good idea.
In the letter to investors, Morehead said the poor performance of Dash, Waves, OmiseGo, and Bitshares were mostly responsible for the decline in the fund’s revenue. Dash has been in free-fall since the start of 2018 and is among one of the worst performing cryptocurrencies in the market. Dash prices slumped by more than 30 percent in May.
Waves is another digital currency that performed poorly, dropping 85 percent of its value in May 2018. Like Dash, Waves has declined significantly throughout 2018 so far. At the start of the year, the 40th-ranked cryptocurrency according to CoinMarketCap was trading at above the $12 mark. By the end of May 2018, prices had slumped to below $5. OmiseGo and Bitshares dipped by 34 percent and 46 percent respectively during the same period.
Pantera Calls Out Warren Buffett
The firm also criticised Warren Buffett for his negative stance of cryptocurrencies saying:
Buffett avoided the dot-coms, but he also missed Amazon, Facebook, Google Netflix, et al. If Berkshire buys Bitcoin as quickly as Apple — it will be in 2045. Buckle in.
Buffett has on several occasions, expressed his dislike of Bitcoin and the cryptocurrency market in general. The Oracle of Omaha has called the industry “rat poisoned,” and “a bubble.” Despite his successes in the financial market, the Berkshire Hathaway chief hasn’t always called it right, missing out entirely on many plum stocks and being to the party as far as investing in others was concerned.
Do you think it is wise to diversify your cryptocurrency investment portfolio? Keep the conversation going in the comment section below.
Images courtesy of Pantera Capital and CoinMarketCap.