Cryptocurrency hedge funds have posted hefty gains so far this year, benefiting from the surge in transactions that allow lenders and borrowers to transact without banks, as well as a steady rise in the bitcoin price.
A crypto hedge fund index launched in September 2018 by crypto fund of funds Vision Hill Group showed a return of 126 in 2020.
Noncrypto hedge fund sectors tracked by another data group, BarclayHedge, were also in positive territory, but up a modest 1.70 through September.
The emergence of decentralized finance, or DeFi, which are crypto platforms that facilitate lending outside of traditional banking institutions, was at the core of crypto funds robust performance this year, said Scott Army, founder and chief executive officer of Vision Hill, which has exposure in DeFi as well.
The total number of loans on DeFi platforms was 11.1 billion on Thursday, industry site DeFi Pulse data showed, up 180 from roughly 4 billion in August. DeFi sites run on open infrastructure, with algorithms that set rates in realtime based on supply and demand.
Framework Ventures, a 100million venture capital fund and the biggest investor in the DeFi space, believes DeFi will soon have its mainstream moment.
Users are trying to vote with their dollars in terms of how they view the capabilities of DeFi, said Michael Anderson, cofounder of Framework Ventures, noting that some DeFi platforms have more volume than the much larger digital asset exchanges.
Meanwhile, bitcoins more…