How to Achieve Success with Cryptocurrency Funds
Over the last several years, only a few financial assets were able to make returns comparable to what the cryptocurrencies have made. Due to the popularity of cryptocurrencies, which is mainly because of their excellent returns, the investment industry has seen significant increase in activities. Experts in blockchain marketing strategy believe that one notable trend was new hedge funds that are solely or partially dedicated to trading no-security cryptocurrencies. The rise of crypto hedge funds changed the landscape of fund management. Fund managers were introduced to new means of raising a capital, trading means with less restrictions but higher transparency.
There are hundreds of cryptocurrency funds today, with more than USD 2 billion in assets under management as of 2019, according to Coin Telegraph. This trading activity did not earn much respect from the skeptics but its appeal as a new and innovative concept still attracted the attention of many investors.
Cryptocurrency funds require adequate protection from the effects of broad security regulations that traditionally govern common forms of hedge funds. This protection pertains to focusing trading activities to regulated cryptocurrencies only such as Bitcoin and Ether. Another measure is by regular reevaluation of their trading activities.
In order to avoid risks related to trading regulations, cryptocurrency funds should:
- Clearly disclose its trading strategy with respect to the currencies traded;
- Clearly disclose risks associated with regulations’ ambiguity, including potential regulation changes in the future;
- Request a no-action relief for the fund activities;
- Actively work with independent third-party services for diligence and compliance;
- Establish internal protocols to protect the crypto fund’s unregulated status; and
- Constantly assess the application of existing regulations and collaborate with regulators to avoid problems and delays.
Keep in mind the above-mentioned requirements when planning to invest in a hedge fund. It also helps to seek the advice of experts and registered service providers to ensure the safety of your investment.