Crypto Hedge Fund Opens Early as Bulls Rush to Buy the Dip

Updated on
  • Silver 8 opens mid-month subscriptions after investor requests
  • Fund has lost money this year amid cryptocurrency slump

Investors rushing to bet on a cryptocurrency rally have prompted one hedge fund manager to take the unusual step of accepting new money in the middle of the month.

Silver 8 Capital, whose bullish bets on digital assets helped propel its hedge fund to a 771 percent gain last year, told new and existing clients it will allow mid-month subscriptions after getting several requests from investors to boost their exposure in the wake of a $500 billion selloff in virtual currencies over the past four weeks. The Florida-based manager, which invests in digital assets, early-stage companies and publicly-traded securities, usually only accepts new money at the start of each month.

It’s the latest evidence that bottom fishers -- and some long-term investors -- see a buying opportunity after many digital coins lost more than half their value on concerns over increased regulation. Bitcoin has rallied more than 40 percent over the past three days, despite warnings about the dangers of virtual currencies from the Bank for International Settlements, Goldman Sachs Group Inc. and the World Bank. Mike Novogratz, the former Wall Street macro trader, raised about $250 million for a cryptocurrency merchant bank amid the selloff, Bloomberg reported this week.

“We do not claim to have the ability to prognosticate short-term price movements,” Silver 8 said in an email. “These markets have experienced quick turnarounds in the past, but there is no guarantee history will repeat itself. However, the drawdown may be an entry point to consider for those of you already exploring a long-term allocation to the sector.”

Silver 8’s Global Financial Technology Fund, which started trading in 2015, locks up investors’ initial investments for the first year and charges a 5 percent penalty fee for withdrawals during the second year. After that, investors can redeem on a quarterly basis with a 45-day notice, according to its newsletter.

The fund, which managed more than $200 million at the end of January, lost 1.5 percent last month as Bitcoin slumped. The performance so far in February is in “negative teen territory,” it said.

The Eurekahedge Crypto-Currency Hedge Fund Index dropped 7.6 percent in January, according to preliminary data. It surged 1,472 percent last year as cryptocurrencies including Bitcoin, Ether and Litecoin soared to records.

In their year-end commentary, the Silver 8 fund’s co-managers Manuel Anguita and Jose Suarez expressed confidence in the medium-term prospects for digital currencies while warning investors to expect more turbulence.

“We have never been 100 percent invested into digital assets,” they said. “Looking ahead, we expect high levels of volatility, consistent with the uncertainty inherent in early stage technology investing.”

For more on cryptocurrencies:
Cryptocurrencies Are Like Ponzi Schemes, World Bank Chief Says
Cryptocurrencies Get Word From SEC Inspectors: We Are Watching
Novogratz Is Said to Raise $250 Million for Crypto Merchant Bank
Winklevoss Twins Say Increased Regulation is Bullish for Bitcoin
Bitcoin on Credit? For 20 Percent of Owners, That’s A Yes

(Updates Bitcoin rally in third paragraph.)
    Before it's here, it's on the Bloomberg Terminal. LEARN MORE