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A group of cryptocurrency-focused hedge funds have seen unexpected gains in recent weeks as Donald Trump’s election victory fueled a powerful rally that propelled bitcoin above the $100,000 milestone.
Funds employing crypto strategies posted gains of 46 percent in November, bringing their year-to-date returns to 76 percent, according to data provider Hedge Fund Research. Returns have outpaced those of the broader industry, with the average hedge fund gaining 10 percent in the first 11 months of this year, HFR said.
Brevan Howard Asset Management and Galaxy Digital, the cryptocurrency investment manager founded by billionaire Mike Novogratz, have been among the biggest winners from the recent surge in digital assets.
The huge gains by crypto funds come after Trump’s election victory in November added a new jolt of enthusiasm to this year’s rally in bitcoin, the largest cryptocurrency, which has also sent smaller tokens soaring.
Bitcoin has surged 130 percent this year to around $100,000, helping boost the market value of the top crypto tokens by $1.8 trillion to $3.5 trillion, according to the FT Wiltshire Digital Asset Dashboard. The cryptocurrency market retreated from recent highs this week after the Federal Reserve said it would cut rates less than expected next year, weighing on risk assets.
Investors are betting that Trump’s crypto-friendly nominees for top government jobs will contrast with Joe Biden’s administration, which has generally taken a more skeptical approach.
“Trump’s election is great news for digital assets because it will bring more clarity on the regulatory side,” said Damien Miller, managing partner at macro hedge fund MP Alpha Capital. “There will be a more friendly and collaborative environment towards bitcoin and blockchain.”
Brevan Howard’s flagship crypto fund gained 33 percent in November and is now up 51 percent in the first 11 months of the year, according to investors. Brevan Howard, who has $35 billion in assets, is one of the largest hedge fund managers who has a dedicated cryptocurrency business, which he launched in 2021.
Galaxy’s hedge fund strategy gained 43 percent in November and 90 percent in 2024, according to investors. The New York-based group has more than doubled its assets under management in the past two years, to $4.8 billion, in part by purchasing assets from bankrupt crypto companies.
Galaxy and Brevan Howard declined to comment on their performance.
The recent surge in digital assets marks a stunning reversal of fortune for a sector that was mired in deep crisis as of 2022.
Bitcoin hit a low of around $15,500 when Sam Bankman-Fried’s FTX exchange crashed in November 2022. Galaxy, which has tried to position itself as a full-service crypto financial services company, posted a net loss of $1 billion that year.
The cryptocurrency industry received a boost in January 2024 when the US Securities and Exchange Commission approved 11 bitcoin exchange-traded funds, opening the door to cryptocurrencies for new institutional and retail investors. BlackRock, the world’s largest asset manager, said last week that it sees “a case for including bitcoin in multi-asset portfolios.”
NextGen Digital Venture, a $120 million crypto stock fund, is up 330 percent since its launch in March 2023 through the end of November, according to investors. He has profited from positions in some bitcoin ETFs, as well as cryptocurrency exchange Coinbase and software provider-turned-bitcoin investor MicroStrategy.
“After the bitcoin ETF was approved, we felt that cryptocurrency stocks would become another opportunity for institutional investors because they already had access to bitcoin,” said Jason Huang, founding partner at NextGen Digital Venture.
Coinbase is up almost 60 percent since the end of 2023, while MicroStrategy is up more than 400 percent.
Some macro hedge funds, which trade macroeconomic trends in currencies, commodities, bonds and stocks, have also increased exposure to digital assets in anticipation of a favorable market environment. MP Alpha Capital’s $20 million global macro hedge fund is up more than 30 percent this year, investors say.
“We’ve had a good run with digital assets: bitcoin, ethereum and bitcoin miners,” Miller said, referring to companies that complete complex calculations in exchange for tokens.. “Over the last 18 months, our entire thesis revolved around institutional adoption of digital assets and the macro context of looser monetary policy, a weaker dollar and a liquidity-rich environment.”
Trump has noted that cryptocurrency regulation is among his most pressing priorities and has named venture capitalist and Elon Musk confidant David Sacks as the White House cryptocurrency czar.
Cryptocurrency enthusiasts have also welcomed a change in leadership at the SEC, the top American securities regulator.
Gary Gensler, the current president who called cryptocurrencies a “wild west” rife with illegality and risk to investors, will resign when Trump takes office. It had refused to draft rules targeting digital assets, arguing that many tokens are securities and that existing securities law is sufficient guidance.
Gensler will be replaced by cryptocurrency advocate Paul Atkins.
Still, several managers warned that bitcoin’s rise should make investors pause and take stock. NextGen Digital Venture’s Huang said that while he is long-term bullish on bitcoin and cryptocurrencies, “no asset rises in a straight line without volatility.”
