Cryptocurrency-themed hedge funds outperformed Bitcoin, the world’s largest cryptocurrency by market cap, in November. While Bitcoin closed November with a loss of 6.5 percent, hedge funds with exposure to a diverse portfolio of cryptos including altcoins, lost only 2 percent, according to a report by Bloomberg that quoted data from Eurekahedge Cryptocurrency Hedge Fund Index.
The world’s largest cryptocurrency has fallen from an all-time high of over $69,000 hit early November to under $48,000 now, in just a little over a month. In early December, the Ether (ETH) to Bitcoin (BTC) ratio or numbers of bitcoins needed to buy one ether, rose to its highest in three years. This is also an indicator that investors may have shifted their focus to ether and other altcoins from Bitcoin.
The rise of altcoins
Bitcoin has gained nearly 67 percent since the beginning of the year while the second largest crypto ETH has jumped over 400 percent. Another altcoin, Solana has clocked gains of over 10,000 percent and is now on the fifth spot in terms of market cap among all cryptocurrencies, according to data from Coinmarketcap. In fact, in terms of market cap gains, altcoins have significantly outperformed bitcoin.
The Bloomberg report noted that this trend is equally true with crypto-based hedge funds. The Eurekahedge Cryptocurrency Hedge Fund Index, an equally weighted index of 18 constituent funds, has gained 170 percent this year.
Although the broader crypto market has started bouncing back gradually over the past two weeks there is still some pressure on anticipation of multiple interest rate hikes by the US Federal Reserve next year, fresh comments on cryptocurrency regulations by SEC Chairman Gary Gensler and rising uncertainty over the new omicron variant of the coronavirus, and President Joe Biden’s latest infrastructure bill that could have tax implications for crypto investors. Bitcoin may be underperforming other cryptos on profit-taking after the sharp rally.
Given the extreme volatility in cryptocurrencies, experts recommend keeping investments in them at under 5 percent of your portfolio. As Bill Noble, chief technical analyst at Token Metrics, a cryptocurrency analytics platform, pointed out to Time, if you have kept your investments in cryptocurency under 5 percent, then there is no need to stress over the swings, because they will keep happening.”
“Volatility is as old as the hills, and it’s not going anywhere,” Noble said. “It’s something you have to deal with.”