HashKey Capital, a subsidiary of Hong Kong’s crypto juggernaut HashKey Group, is launching a fund on Friday with an uncommon focus — second-tier cryptocurrencies, colloquially often known as “altcoins.”
This gamble veers away from the normal funding strategy dominated by Bitcoin and Ethereum. It goals as an alternative to capitalize on lesser-known digital property’ high-reward, high-risk nature.
HashKey Capital Targets Untapped Alpha
Portfolio supervisor Jupiter Zheng, the strategist behind HashKey Capital’s fund, targets an investor base of high-net-worth people and corporations catering to rich Asian households. In response to Zheng, the crypto market has an untapped demand for above-average returns, or what funding professionals time period ‘alpha.’
In a local weather the place Bitcoin and Ethereum have grow to be nearly standard funding routes, the hunt for alpha leads HashKey Capital down a less-traveled path.
Learn extra: What Are Altcoins? A Guide to Alternative Cryptocurrencies
The corporate’s new fund embraces altcoins with enthusiasm. Lower than half of the fund’s portfolio will encompass investments in Bitcoin and Ethereum. This can be a notable shift from the prevailing funding paradigms in crypto, which generally advocate for a extra conservative, Bitcoin-centric technique.
As a substitute, the fund goals to leverage HashKey’s wealthy expertise in crypto enterprise investments, diversifying into altcoins that promise higher volatility.
Learn extra: What Is Altcoin Season? A Comprehensive Guide
Whereas this technique could elevate eyebrows, it comes when Hong Kong emerges as a prominent hub for crypto innovation. The federal government has been proactive in fostering a crypto-friendly environment. Subsequently selling the event of Web3 expertise.
Hong Kong has hosted greater than 100 crypto-related conferences this yr. And its Securities and Futures Fee (SFC) has lately updated regulations to permit centralized crypto exchanges to serve retail clients, offered they maintain an SFC license.
The Excessive Dangers of Investing in Altcoins
With over $1 billion in property beneath administration, HashKey Capital goals to boost a further $100 million for the brand new fund. It additionally plans to maintain some holdings in money to mitigate the dangers.
Nonetheless, altcoins are infamous for his or her value volatility. These property expertise important spikes in bull markets however crash dramatically when market sentiment turns bitter.
This erratic habits has contributed to the closure of roughly 13% of crypto hedge funds within the present yr, as revealed by Swiss funding consultancy 21e6 Capital AG.
Within the first six months of 2023, the common return for crypto funds was 15.2%. In the meantime, Bitcoin recorded 65.2% positive factors throughout the identical timeframe. Many of those funds maintained increased money reserves than standard as a result of upheaval within the crypto sector in 2022, highlighted by the downfall of FTX.
Consequently, hedge funds didn’t capitalize on Bitcoin’s sturdy efficiency for the reason that starting of the yr. In distinction, essentially the most important altcoins lagged behind Bitcoin.
Whether or not HashKey Capital’s wager on altcoins will repay stays an open query. If the gamble fails, it will likely be a cautionary story, underscoring the inherent dangers of chasing excessive returns.
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