Digital assets refer to all assets that have a binary format and come with a right to use. They can refer to all types of digital documents and content that can be stored on digital devices. For the financial world, cryptocurrencies are the most relevant types of digital assets. The cryptocurrency is an exchange medium that is created and exchanged using cryptography. Bitcoin is by far the most famous cryptocurrency, but its dominance was shaken in the last few years by the emergency of other cryptocurrencies such as Monero, Ethereum, or Ripple. Since digital currencies are considered to be the foundation of our financial future, there is a lot of hype surrounding digital funds. These funds are indeed an excellent investment opportunity but the digital currency market is very instable, so you need to do a lot of research in order to navigate it with minimum risks.
As we already mentioned, cryptocurrencies use cryptography to secure transactions and to keep their creation under control. Their validity is provided by a blockchain, which is an ever-growing list of records, also known as blocks. Each record has hash pointer which links to a previous record, as well as a timestamp and transaction information. The transactions are recorded between two parties, which makes them impervious to hacks or other data modifications. Cryptocurrencies don’t follow a central authority, being founded on a peer-to-peer network. As such, they cannot be influenced by governments or corporations, which technically should make them a safe investment opportunity. However, the digital currency market is still growing and evolving, and it will continue to be unstable for a while.
Bitcoin was the first decentralized digital currency. It was created in 2009 by a person or a group of people going under the name of Satoshi Nakamoto. Bitcoin’s value and popularity grew at staggering rate for a few years, and it is still on an ascending trend. Nonetheless, the appearance of altcoins has somehow slowed down its growth. Altcoins are alternative cryptocurrencies. Basically, they refer to all cryptocurrencies which are not Bitcoin. Litecoin was the first altcoin. It was released in 2011, and it was quickly followed by Peercoin, IOTA and several other digital coins. All of these currencies use different hash points, and IOTA doesn’t even use a blockchain system. In the following years, financial experts are expecting the emergence of several other forms of cryptocurrencies.
For a couple of years, the only way of investing in crypto currencies was to mine them. However, as more and more people started mining the coins, and as the mining algorithms evolved, it became increasingly harder to mine digital currencies, and this led to the appearance of hedge funds. It took a while for hedge funds to become popular. For a few years, there were only a few funds that invested in the crypto market, but after 2017, these funds started being very common. At the moment, there are over 250 hedge funds that invest in the digital asset market, and they manage over $3.5 billions.
Crypto funds are appealing to all types of investors, but they are usually preferred by startup managers and pension funds. Since this market is quite unstable and under continuous development, investors usually turn to investment fund services for cryptocurrency fund administration. A reputable fund service company will handle everything that has to do with the fund formation and administration, from building and structuring the investment portfolio, to handling the regulatory compliance, dealing with the investors and the shareholders, providing online reports, as well as support services and custody services.
The trading strategy can be different for each fund, according to the fund’s goals. Some only invest in bitcoin, while others develop diverse investment portfolios, and some stick to a passive-management index strategy. In the following years, financial experts predict a surge of crypto hedge funds, which will lead to a heavily increased trading activity, and consequently, an increased market volatility.