Cryptocurrency-themed hedge funds outperformed Bitcoin, the world’s largest cryptocurrency by market cap, in November. According to Bloomberg, Bitcoin lost 6.5 percent in November, but hedge funds that have exposure to multiple cryptos, including altcoins suffered a 2 percent loss.
In just over a month, the world’s biggest cryptocurrency fell from an all-time peak of $69,000 in November to below $48,000 now. The Ether to Bitcoin (BTC), or the number of bitcoins required to purchase one ether, reached its highest level in three years in early December. This could also indicate that investors have switched their attention to ether and other altcoins instead of Bitcoin.
Bitcoin has risen nearly 67 percent in the past year, while ETH, the second-largest crypto, has risen more than 400 percent. According to Coinmarketcap data, Solana, another altcoin has seen gains of more than 10,000 percent. It now occupies the fifth spot among all cryptocurrencies in terms of market capital. Altcoins are actually significantly ahead of bitcoin in terms market cap gains.
This trend was also observed in crypto-based hedge funds, according to a Bloomberg report. The Eurekahedge Cryptocurrency Hedge Fund Index has seen a 170 percent increase in its weighting, which is an equal number of 18 constituent funds.
The crypto market has been slowly recovering over the last two weeks, but there are still pressures from the anticipation of multiple interest rates hikes by the US Federal Reserve next Year, fresh comments by Gary Gensler on cryptocurrency regulations, rising uncertainty over the new coronavirus variant, President Joe Biden’s latest infrastructure bill, which could have tax implications. After the sharp rally, Bitcoin could be outperforming other cryptos in profit-taking.
Experts recommend that you keep your investments in cryptocurrency at less than 5 percent of your total portfolio due to the volatility. According to Bill Noble, chief technical analyst of Token Metrics (a platform for cryptocurrency analytics), cryptocurency swings will continue to happen if your investments are kept below 5 percent.
Noble stated that volatility is as old and as ancient as the hills. It’s not going away. It’s something that you must deal with.