Crypto Hedge Funds Thrived in 2024, But Bitcoin Remained Unbeatable

In 2024, crypto hedge funds experienced a remarkable year, with multiple funds achieving double-digit returns. According to data from Galaxy's VisionTrack, the VisionTrack Composite Index, which tracks the performance of 130 crypto-specific hedge funds, rose 40%. However, Bitcoin's performance overshadowed that of the hedge funds, as the cryptocurrency rose 120% and broke through $100,000 for the first time. Despite the impressive returns of crypto hedge funds, Bitcoin remained the clear outperformer.



Crypto hedge funds employed various strategies to achieve their returns in 2024. Funds focused on digital asset industry directional and quantitative strategies had the best average performance, with the VisionTrack Quantitative Directional Index rising 53.7% and the VisionTrack Fundamental Index rising 40.4%. The VisionTrack Market Neutral Index rose about 18.5%. Galaxy Digital's Alpha Liquid Fund rose 76.6%, and David Tawil's ProChain Master Fund, a multi-strategy cryptocurrency investment vehicle launched in 2018, rose about 70% last year. Reflexive Capital, a long-leaning fundamental crypto hedge fund, saw a 106% increase in net returns in 2024.

However, crypto hedge funds faced challenges in trying to outperform Bitcoin. David Kalk, founder and chief investment officer of Reflexive Capital, attributed this to the fact that "2024 is a challenging year for many cryptocurrency funds because it is the year of Bitcoin and Memecoin - they are the best assets, and everything else lags behind." David Jeong, CEO of Tread.fi, an algorithmic cryptocurrency trading platform for institutional traders, echoed this sentiment, stating that "outperforming Bitcoin is a challenge because 'timing is hard'."

Despite these challenges, some crypto hedge funds managed to achieve impressive returns in 2024. The growing interest in digital assets, driven by increased regulatory clarity and the launch of spot cryptocurrency ETFs, has boosted confidence among traditional hedge funds. Nearly half (47%) of traditional hedge funds surveyed this year have exposure to digital assets, up from 29% in 2023 and 37% in 2022. Among those already invested, 67% plan to maintain the same level of capital employed while the remaining 33% plan to invest more capital by the end of 2024.

In conclusion, while crypto hedge funds had a great 2024, they failed to beat Bitcoin's impressive performance. Despite employing various strategies and achieving significant returns, the cryptocurrency remained the clear outperformer. As the digital assets investment landscape continues to evolve, hedge funds will need to adapt their strategies to better compete with Bitcoin and other top-performing cryptocurrencies.