Crypto hedge fund

Like traditional hedge funds, crypto funds raise money from wealthy individuals, family offices and institutions, charge management and performance fees and have broad freedom in what they do. Strategies range from directional bets on tokens to market-neutral approaches such as basis trades, funding-rate arbitrage, market making and relative-value trades between exchanges.

These funds supply a large share of liquidity on exchanges and DeFi venues, often hold early token allocations through liquid venture sleeves, and their positioning appears in futures open interest and options flows. Their returns are reported in industry indices and are followed as a sign of institutional sophistication in the market.

Leverage, counterparty exposure to exchanges and lenders, and illiquid token positions are the classic dangers. The collapse of Three Arrows Capital in 2022, a fund that borrowed heavily from crypto lenders, spread losses across the industry. Lock-up periods, opaque reporting and fees mean investors carry risks beyond price.