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Crypto Investment is Gaining Traction with Hedge Funds

Crypto Investment is Gaining Traction with Hedge Funds – Part 2

This Part 2 of our two-part blog post series discussing the significant trend we are tracking in Hedge Fund investment in Crypto including BitCoin, Ethereum, and many other Crypto coins, platforms, and other technologies. In the blog post, we’ll pick up where we left off, however, we are going to dive deep into the Crypto world with our Director of Operations here at Ryan Eyes, Madan Babu.

Madan’s perspective is that not only is the trend in Crypto investing increasing but also that the trend is in its infancy and will expand into Altcoins and other Crypto technology. If you recall from Part 1, Madan suggested that Cardano, Tether, XRP or Ripple, Monero, Stellar, Solana, and Polka Dot or Dot Network are names to watch in the near term as investments. Will dig into those Altcoins and technologies in the next section.

According to ARKK’s Cathie Wood, 5 Massive Technology Platforms hitting their growth phase of the adoption S-Curve at roughly the same time…this has never happened in history.

 

The Emergence of Altcoins as a Hedge Fund Investment

Let’s start with the very basics – to be clear Altcoins are cryptocurrencies other than Bitcoin. They share characteristics with Bitcoin but are also different from them in other ways. For example, some altcoins use a different consensus mechanism to produce blocks or validate transactions. Or they distinguish themselves from Bitcoin by providing new or additional capabilities, such as smart contracts or low-price volatility.

As of March 2021, there were almost 9,000 cryptocurrencies. According to CoinMarketCap, Altcoins accounted for over 40% of the total cryptocurrency market. Because they are derived from Bitcoin, altcoin price movements tend to mimic Bitcoin’s trajectory. However, crypto analysts say the maturity of cryptocurrency investing ecosystems and the development of new markets for these coins will make price movements for altcoins independent of Bitcoin’s trading signals. Some of the main types of altcoins include mining-based cryptocurrencies, stablecoins, security tokens, and utility tokens. By distinguishing themselves from Bitcoin in this manner, altcoins have created a market for themselves. In turn, this has attracted investors who see potential in them as alternatives to Bitcoin. The investors expect to profit as altcoins garner more traction and users and appreciate in price. The top 10 altcoins are Ethereum, Binance Coin, Tether, Cardano, Polkadot, XRP, Uniswap, THETA, and Litecoin as of March 2021.

Cathie Wood, the CEO of Ark Investment Management (Ark Invest), discussed bitcoin and crypto last week at the SALT Conference and made headlines when she said “We believe that the price will be tenfold of where it is today, so instead of $45,000, [it would be] over $500,000.”Further, when asked which cryptocurrency she would invest in if she could pick just one, Wood said she would default to bitcoin “because countries are now deeming it legal tender.” The Ark Invest executive is referring to El Salvador where the country’s Bitcoin Law went into effect on Sept. 7 making BTC legal tender alongside the U.S. dollar.

However, she went on to say, “our confidence in Ethereum has gone up dramatically as we have seen the beginning of the transition from Proof-of-Work to Proof-of-Stake.” Wood also said that Ark Investment’s exposure to crypto in the future was likely to include a higher percentage of Ethereum, with a split more along the lines of 60 percent BTC and 40 percent ETH.

 

Which are the Top Altcoin Investments?

Let’s do a bit of research into the Altcoin investments that Madan mentioned in Part 1 of this blog post series and get his take on the prospects and future of these investments. Let’s take them one at a time, define them and assess their price history.

AltCoin – Cardano is designed to be a next-gen evolution of the Ethereum idea. It’s intended to be a flexible, sustainable, and scalable platform for running smart contracts, which will allow the development of a wide range of decentralized finance apps, new crypto tokens, games, and more. Cardano’s native cryptocurrency is ADA, which can be used to store value, send and receive payments, and for staking and paying transaction fees on the Cardano network.

Price History – Cardano is up 2,393% over the past year and almost 11,000% since its inception in October 2017.

 

AltCoin – Tether (USDT) is an Ethereum token that is pegged to the value of a U.S. dollar (also known as a stablecoin). Tether’s issuer claims that USDT is backed by bank reserves and loans which match or exceed the value of USDT in circulation.

Price History – The price has been stable, essentially $1 since its inception in 2015.

 

Figure – Coinbase Platform Pricing/Trading Interface

 

AltCoin – XRP is the native cryptocurrency for products developed by Ripple Labs. Its products are used for payment settlement, asset exchange, and remittance systems that work more like SWIFT, a service for international money and security transfers used by a network of banks and financial intermediaries. XRP is pre-mined and uses a less complicated method of mining as compared to Bitcoin.

Price History – The XRP coin hit significant price highs around $3 per coin in early 2018, up considerably from trading below the $0.05 level in early 2017. It is up 18,000% since its inception and 325% over the past year.

 

AltCoin – Monero – The majority of existing cryptocurrencies, including Bitcoin and Ethereum, have transparent blockchains. Transactions can be verified and/or traced by anyone in the world. Unlike selectively transparent alternatives (e.g. Zcash), Monero is the only cryptocurrency where every user is anonymous by default.

Price History – Monero is up over 10,000% since its inception in 2014 and up nearly 200% over the past year.

 

AltCoin – Stellar is a blockchain payment platform originally launched as a hard fork of the Ripple network in 2014. Created by the nonprofit Stellar Development Foundation, XLM aims to connect businesses and financial institutions around the world via blockchain — allowing them to quickly settle payments and make low-cost currency exchanges.

Price History – Stellar Lumens is up over 10,000% since its inception around 2015 and up over 300% in the past year.

 

AltCoin – Solana is one of a number of newer cryptocurrencies designed to compete with Ethereum. Like Ethereum, Solana is both a cryptocurrency and a flexible platform for running crypto apps — everything from NFT projects like Degenerate Apes to the Serum decentralized exchange (or DEX). However, it can process transactions much faster than Ethereum — around 50,000 transactions per second.

Price History – Solana is up nearly 20,000% since its inception in May of 2020. Yes, 20,000%! It’s up 5,000% this year alone but has taken a bit of a hit recently dropping over $50 to $163.

 

AltCoin – The Polkadot protocol is designed to allow unrelated blockchains to securely talk to each other, so that value or data can flow between, say, the Ethereum and Bitcoin blockchains without any intermediary. It’s also designed to be speedy and scalable, via the use of many parallel blockchains (or “parachains”) that take much of the processing demand off of the main blockchain. The DOT token is used for staking and governance.

Price History – Polkadot is up over 1,000% since its inception around May of 2020 and 565% over the past year.

 

Challenges to Investing in Altcoins and Crypto

We had this section in our last blog post but really want to dig in here so that you have all the information you need to find the best Altcoin investments among the 900 choices. We said, “Hedge Funds and other investors are scrambling for tools and technology to uncover the Cryptocurrency or Altcoin investments that will deliver Alpha. Scouring dozens or even hundreds of sources online to find the hidden gems among the thousands of Cryptocurrency and Altcoin investments is an arduous and time-consuming task.”

Figure 2 – Ryan Eyes Software Will Scrape Data for Analysis

 

The reality today is that tracking, valuing, analyzing, and ultimately uncovering the most optimal investments for you and your fund is not like equity investing because of the lack of tools. The figure below is a snapshot of just a fraction of the information you will find on a trading or investing site like E-trade. And of course, almost every fund has access to a Bloomberg terminal, technical analysis software, and nearly countless other industry-standard tools as well as the firm’s own proprietary tools. Crypto and Altcoins simply do not have that depth of data…at least not yet.

Figure 3 – Snapshot of AAPL from the E-Trade Platform

 

The 4 Steps to Success in Investing in Crypto and Altcoins

So, what do you do to be a successful Crypto investor in our opinion:

  • Gather the data you need to find the right Altcoin to trade to meet your risk management and financial goals
  • Analyze the data in a way that provides you with clean, straightforward investment ideas
  • Monitor social media and other websites that follow the Crypto industry in order to stay on the leading edge of opportunities, compliance, breaking news, and other information
  • Create price, volume and sentiment tracking, alerts, and easy to consume insights to provide critical, timely information

As we said in the previous blog post, the primary obstacle for most Hedge Funds and investors is the Crypto and Altcoin data they need is scattered across a variety of sites and the pain-staking effort of gathering, databasing and analyzing the information is brutally time-consuming. Ryan Eyes Web Watcher is a website scraping technology that can monitor and capture insights from any website automatically at custom time points including when data is changed. Web Watcher is an integrated, data analysis technology that not only captures key data points but also transforms them into alpha-generating insights.

Web Watcher allows users with no technical expertise to monitor data points on one or multiple websites, schedule the automatic collection of those data points and configure notification alerts. No technical, manual coding and an intuitive interface means users can set up a Web Watcher and begin capturing data from websites seamlessly in just minutes.

Ryan Eyes Web Watcher allows users to monitor any social networks for information in the Altcoin space. Monitoring social trends allow investors, funds, and regulators to keep a vigilant eye major changes to a crypto movement based on sentiment. Think Elon Musk and Dogecoin as an example when Musk tweeted about the Altcoin and sent its price down over 10% in a matter of minutes.

Conclusion

The Crypto and Altcoin space are ripe with opportunities and as investors the mind-blowing returns that the Altcoins that Madan discussed in this post are attracting investors to the space in droves including Hedge Funds. That said, as we saw with Bitcoin and Ethereum, and I noticed with nearly every Altcoin that I researched for this post, there are periods of time when the prices of even blue-chip coins in the space have plummeted 50% or more in a short span of time.

Figure 4 – Screenshot of Actionable Signals Panel in Coinmarket.com – https://coinmarketcap.com/currencies/cardano/onchain-analysis/

 

As an example of where to start, one of our favorite sites and the one we showed earlier in the post is www.coinmarketcap.com – it has price history, trading volume, % of holders making money, sentiment analysis, and more. This is an ungated site that can be scraped with Web Watcher, and the data can be brought into spreadsheets, proprietary tools, or Ryan Eyes Software itself to be analyzed to uncover the most optimal Altcoin investments for your portfolio.
You can read more about our Web Monitoring and Tracking Capabilities click the link and our PDF will automatically download.

Thanks for reading our post!

 

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