Sometimes “HODL” really is the best advice.
Simply holding Bitcoin and Ether massively outperformed crypto hedge funds (along with the vast majority of non-crypto assets) in 2020.
BTC kicked off 2020 at just under $3,700 and reached almost $19,400 by the end of November, a 425% increase. ETH started the year at around $130 and reached $605 in the same time frame, resulting in a 360% return. BTC surged another 50% to $29,100 by the end of 2020, while ETH climbed 22% to $740.
Eurekahedge and Vision Hill Group indices tracking crypto hedge funds show returns for the portfolios—which spread investments across a number of cryptocurrencies—are lower than gains for ETH and BTC in 2020 through November (the latest date for which there’s data for all the indices).
Investors pay about 2% management fees and 20% performance fees for crypto hedge funds to manage their assets, according to PwC’s 2020 Crypto Hedge Fund report. That’s not a good deal if managers aren’t beating the benchmark cryptocurrencies.
Eurekahedge’s Crypto-Currency Hedge Fund Index, which is equally weighted across 19 constituent funds that utilize a range of strategies including arbitrage, long/short equity, and event-driven opportunities, showed a 135% return through the end of November.
Vision Hill’s Crypto Hedge Fund indices include three categories— Fundamental Index, Quantitative Index, and Opportunistic Index—in addition to the Composite Index, which had a 170% return in that time.
These gains are dwarfed in comparison to BTC and ETH. To put it into perspective, just holding BTC would have resulted in over three times the gains within the same period of time.
Best and Worst
Vision Hill’s Fundamental Index had the highest year-to-date return at 305%, achieved through a combination of “deep value research + tactical, catalyst, and event driven positioning” and “high conviction asset selection.” This is still less than the 2020 gains of just holding ETH.
The worst performing index, at 35.81%, comes from the Opportunistic Index which follows “credit and yield driven strategies with digital asset collateral” and “options, derivatives, and volatility strategies.” In other words, ETH performed over ten times better than Vision Hill’s Opportunistic Index.
To be sure, with the exception of their severely underperforming Opportunistic Index, the other three Vision Hill indices (Fundamental, Quantitative, and Composite) have all outperformed BTC and ETH when taking into account overall gains since the beginning of 2017.
This suggests that diversified strategies and portfolios might be more stable during massive market crashes like the one in 2018.
But when DeFi and crypto are booming, holding still seems to be the best strategy for long-term investors.