Wall Street - Bitcoin hedge funds

Crypto hedge funds are launching at a record rate in 2018, despite the ongoing downtrend in the market.

20% of all hedge funds launched in 2018 are crypto-related, according to new research from Crypto Fund Research. It’s a sign that “big money” and institutional investors haven’t been put off by the year’s selling pressure.

90 Cryptocurrency Hedge Funds Launched in 2018

90 new crypto hedge funds have appeared this year, and that number is expected to rise to 120 before the end of December.

Compare that to 2016 when  just 3% of all new hedge funds were crypto-related.

Approximately half the new crypto hedge funds are based in the US, while others have popped up in the UK, Netherlands, Switzerland, China, Australia, and the “Blockchain Island,” Malta.

Rapid growth aside, however, let’s put things in perspective. The total number of crypto hedge funds still account for just 3% of all hedge funds. In terms of market capitalization, crypto funds manage $4 billion compared to the global hedge fund total of $3 trillion.

What’s a Cryptocurrency Hedge Fund?

A crypto hedge fund invests predominantly in crypto assets like bitcoin and ethereum. They may also invest in ICOs (initial coin offerings – a form of crowdfunding capital in the crypto space).

They differ to crypto venture capital funds and private equity funds which invest directly in blockchain projects and crypto startups.

When you invest in a cryptocurrency hedge fund, your money is pooled with others and the returns are shared. Bear in mind, however, that participating in a hedge fund usually involved high minimum deposits.

Undeterred by Low Prices

The rapid growth of hedge funds in a year when bitcoin has dropped almost 70% is curious. Traditionally, hedge funds sprout up during boom markets to capitalize on an uptrend.

Founder of Crypto Fund Research Joshua Gnaizda said:

“These seemingly unfavorable market conditions have not deterred managers from launching new crypto hedge funds at a record pace. While we don’t believe the rate of new launches is sustainable longer-term, there are currently few signs of a significant slowdown.”

Profit From Volatility

While the market conditions might appear unfavorable, a number of crypto hedge funds still make money when prices are down. Hedge funds can profit from volatility, which is why one crypto hedge fund, Amber AI Group, was able to make a 30% profit in the first quarter of 2018, when crypto prices slumped.

Hedge funds are notorious for short-selling, or profiting from an asset’s decline. By doing this, they can “hedge” their losses and, in some cases, make a profit when the whole markets moves downwards.

Wall Street Embraces Bitcoin

The rise of crypto hedge funds is yet another sign that Wall Street is edging closer to broader cryptocurrency adoption.

With the launch of a bitcoin futures market in 2017, rapid hedge fund growth, and an exchange-traded fund (ETF) on the horizon, the “big money” is coming.

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Gatecoin's interface

Founded in 2013, Gatecoin is a Hong Kong based cryptocurrency exchange that finds itself at #25 on BlockExplorer’s top 25 exchanges of 2017 list. Gatecoin offers a good number of trading pairs and an API for programmatic trading. Of the 90 trading pairs Gatecoin offers, there are both crypto/fiat and crypto/crypto offered, with the crypto/fiat pair’s fiat side being one of USD, EUR, or HKD.

Gatecoin has a respectable number of trading pairs and offers an API for programmatic trading. Which makes it a good choice for any traders located in Hong Kong, especially those looking to trade programmatically.

Gatecoin

gatecoin cryptoURL: gatecoin.com
Launched: 2013
Trading pairs: 60
Deposit Fees: Yes
Withdrawal Fees: Yes
Trading fees: Yes
Verification: Yes (Three levels)
Margin Trading: No

Fees and Limits

Fee wise, Gatecoin charges fees based on the trader’s volume over the last 31 days. Unlike some other exchanges, the 31 day period is a rolling one, meaning that you do not have to wait an entire period if you have significantly changed the volume of your trades. Fee levels are broken into the standard maker/taker distribution, where the taker pays a higher percentage than the maker. On the low end, 50BTC/31d, makers pay a fee of 0.25% and takers pay a fee of 0.35%. And on the high end, 20,000+BTC/31d, makers pay 0.02% and takers pay 0.1%. A complete breakdown of the trading fees charged can be found on Gatecoin’s fee page.

For deposit and withdrawal, Gatecoin only seems to charge fees for fiat. The fees paid depends on the transfer method, for example, there is a 1EUR deposit and 5EUR withdrawal fee for SEPA based deposits and withdrawals. The full list of fees can be found on Gatecoin’s transfer costs page.

Limit wise, accounts are limited based on their verification level. For crypto, you can transfer an unlimited amount as soon as you have completed tier 1 verification. And for fiat, tier 1 accounts are limited to $50,000USD or equivalent, which is upped to $100,000USD or equivalent for tier 2. There is no indicated timeframe for these limits.

Registration

Gatecoin’s registration method is a multi-step process that requires a decent amount of personal information. Registration cannot be completed without providing said information.

The first step is an email and password and is input from the normal registration form. Once you have completed the initial registration, you will be required to go through a further five steps on login. Each step requires some personal information from you. With the first step requiring your first and last name, your date of birth, and your current nationality. Following step 1, step 2 requires contact details, specifically, your address and phone number. Step three is simple and requires you to confirm an email address for your account. While step four is essentially verification for level 1, requiring a scanned copy of a photo ID and some proof of residence. And lastly, step five is a questionnaire asking for information regarding your source of funds.

Verification

Gatecoin has three verification tiers, where the first is no verification, the second is “verified”, and the third is “Certified”

Tier 2 verification requires a photo ID no older than ten years, and a proof of residence no older than three months, and a filled out ‘source of funds questionnaire’. Tier 2 is completed as a part of the initial account registration process.

“Certified” verification requires the same documents from Tier 2 to be mailed in as certified hard copies. Once the certified copies of the documents have been received, a video conference based verification takes place. During the Skype call, you will need to show your ID to prove that you are who you say you are. Alternatively, Hong Kong residents can have their documents certified at Gatecoin’s office.

Interface

Gatecoin’s interface is a bright white with two-toned blues for highlights, there is no dark mode offered. The bright background makes the interface difficult to use at night or in dark settings. The trading interface itself is well balanced, with a decent amount of information provided. As for the layout of the trading interface, it is split into four sections. The upper left section holds an order submission form. And on its right is the currently selected trading pair’s order book. On the lower half, there is a trade history on the left and a chart on the right. Along the top of the page is the pair selection dropdown, as well as a small overview of the current ask, bid, volume, high, low, and last trade for the currently selected pair.

Security

Account security wise, Gatecoin offers 2FA by means of Google Authenticator. Gatecoin offers a very granular account security configuration tool that allows you to specify what account actions will be logged via email, require confirmation via email, and require confirmation via 2FA. Granular controls are a welcome sight and make securing your account very easy. Gatecoin also states that all user funds are stored in per-user accounts on their side.

Headquartered in Kiev, Liqui is a crypto-only cryptocurrency exchange with a 235 trading pairs. Liqui offers both a public and private API for programmatic trading and states a 24-hour volume of around 1250 BTC. Liqui’s numerous trading pairs are all against its three main currencies, BTC, ETH, and USDT, meaning that those looking to trade with fiat will want to find a different exchange or a method of converting their crypto after the fact. Overall, It is a good choice for small to medium traders, especially those looking for the ability to trade programmatically against a large number of cryptocurrencies.

Liqui finds itself at #23 on BlockExplorer’s list of the top 25 cryptocurrency exchanges of 2017.

Liqui

liqui cryptoURL: liqui.io
Launched: 2016
Trading pairs: 235
Deposit Fees: No
Withdrawal Fees: No
Trading fees: Yes
Verification: Yes
Margin Trading: No (coming soon)

Fees and Limits

Liqui lays out its fees in the usual maker/taker scheme, where makers pay a 0.10% fee and takers pay a 0.25% fee. All of Liqui’s trading pairs currently have the same fees applied to them. Fees are listed on Liqui’s Fees and Limits page, with the fees specifically only listed for the three ‘main’ cryptocurrencies you trade against; Bitcoin, Ethereum, and USD Tether.

Limit-wise, Liqui has three levels; New accounts are split into three 24 hour periods, where their withdrawal limit increases by 5,000 USDT or equivalent per day, starting at 5,000 USDT. Following the new account restrictions, an account receives the “Basic Account” withdrawal limits of 50,000 USDT or equivalent per day. And lastly, for “Enhanced Accounts”, the limit is 500,000 USDT or equivalent per day. Note that the Enhanced Account’s limit requires both verification and 2FA to be enabled on the account.

Registration

Registering an account on Liqui is simple, and requires a username, email, and password. A confirmation email will be sent to you once you have completed the registration form. And after following the confirmation link in said email, you can begin to trade. Note that new accounts have withdrawal limits that are explained above.

Verification

Liqui has one verification level, the requirements for which are not published. Getting verified begins with a support ticket at their support site. Assume that for verification, the usual information is required. Namely a photo ID and proof of residence.

Interface

Liqui has a soft feel to its interface, which by default is a cool white with blue highlights. Liqui’s interface also offers a dark mode, which can be toggled with the lamp icon at the top of the page. The dark mode maintains the same highlights but trades the light background and dark text for a dark background with light text. Almost all of the interface switches seamlessly, with charts requiring a refresh. Some users may find the dark mode difficult to read, as the contrast between the text and the background is not very high.

On Liquis main trading page, there is a chart and summary front and centre, with buy and sell dialogues below. Further below is an area to select trading pairs, the current order book, trade history, and your personal trade history.

Security

Liqui offers decent security measures, including 2FA. When logging in to your account, without having 2FA configured, you are emailed a security code for that login. The security code is a massive 64 character string, making it safe from brute forcing in the 5 minutes which it works. Two Factor Authentication is offered via Google Authenticator and is simple to set up, using the standard ‘scan this QR code’ approach.

Otherwise, Liqui offers a complete overview of account login activity. Specifically, you can see all active sessions, with the ability to close them, and you can see all login activity, successful or otherwise. Both account information sections have the date, time, and IP address of the occurrence listed.