Hedge Funds Invested $2 Billion In Cryptos This Year: Morgan Stanley

2017 has been a huge year for the crypto market – according to estimates by investment bank Morgan Stanley, approximately $2 billion has been invested in crypto-focused hedge funds this year.

As per a report by Business Insider, the estimate was made on the basis of the investment bank’s own research, and data obtained from consultancy Autonomous NEXT. The findings were presented in a note titled “Bitcoin Decoded”, which was distributed among Morgan Stanley’s clients earlier this week.

The banking giant also found that while more than 100 crypto funds have been set up during the past six years, 84 of these funds were established in 2017.

The timing is no coincidence – cryptocurrencies have surge massively this year, particularly Bitcoin, which has increased more than 1,500% in price. The digital currency started the year at a little under $1,000, and recently smashed the $20,000 barrier this month.

The increase in price has attracted the interest of both Wall Street and Main Street. Initially, the market consisted largely of retail buyers – however, with the crypto market’s market cap having surpassed $600 billion, the opportunity has become too good to pass up, and institutional investors are starting to get in on the action.

Recently, renowned fund manager Bill Miller revealed that his MVP 1 fund has approximately 50% invested in Bitcoin. Mike Novogratz also announced plans for a $500 million crypto-based fund earlier this year, while $95 billion British fund Man Group expressed interest in adding cryptocurrencies to its portfolio. French asset manager TOBAM also launched Europe’s first Bitcoin mutual fund this year in November.

Numerous developments have also been undertaken, which have paved the way for institutional investment in the crypto market. Most notably, Bitcoin futures products were launched by the Chicago Mercantile Exchange (CME) and the Chicago Board Options Exchange (CBOE) this month.

While the development is expected to contribute toward the establishment of Bitcoin as a legitimate asset class, trading on both exchanges has been slow thus far. Crypto funds, by comparison, have been cropping up with increased frequency. As per the BI report, the Cryptocurrency Index launched last week by hedge fund industry data provider HFR, to track investment in the space, “has annualized performance of 292% since inception and has surged 1,641% in 2017 through to November”.

In a press release announcing the launch, HFR President Kenneth J. Heinz observed that investor interest in crypto funds was skyrocketing, as cryptocurrencies start to gain a foothold in the mainstream. However, he went on to advise caution, pointing out that the crypto space still “involves substantial volatility and risks, both real and structural”.