Yes, you noted it correctly, the post below is on crypto funds. You might start saying cryptos are for dummies, any rational investor should avoid them, they have no any value and it's just a speculative bubble.

Pause here for a second. For as long as investors do allocate a portion of their portfolios to crypto currencies, tokens and / or crypto funds it's worth taking a look at the different alternatives and their performance. Last year I invested myself into crypto currency (stablecoin), crypto fund and utility token directly. Traded few more. A fund employs a long/short strategy and I want to be ready when the recent bubble bursts from it's short side (or gain further if it continues from it's long side). Token is a spicy ingredient in my portfolio with tenfold raise since my first investment in May'20. Stablecoin is 1:1 backed by USD and yields 22-26% p.a. with daily payouts. Nothing to compare to 10x run over 9 months, but still mind blowing if you compare to ''cash'' yields.

What about fund performance then? A fund I'm invested with still has a too short track record to draw any meaningful conclusions. So let's take a look at the whole market.

As per Crypto Fund Research, crypto funds were again the hottest investment managers in 2020, gaining more than 160% on the year. However, Bitcoin performed significantly better than the CFR Crypto Fund Index, which measures the performance of a basket of 70+ crypto funds.

So did crypto hedge funds actually underperform? As in any case where you don't now a quick answer but still want to look smart enough, you say "It depends". So the answer to the last question is ''it depends''. And let me explain why.

Crypto hedge funds, as many other funds, are supposed to manage risk in the sometimes extremely volatile markets. As you know, cryptocurrencies and volatility go hand to hand. This typically results in significant outperformance when Bitcoin and other cryptocurrencies decline and underperformance when they rise considerably as they did in 2020.

Crypto funds also operate a number of strategies - some strategies like arbitrage are essentially market neutral and will almost always underperform a long-portfolio in bull markets and outperform in bear markets.

In fact, since the beginning of 2017 crypto funds have gained 2,812% vs. 2909% for Bitcoin (Crypto Fund Research's calculations). Over multiple market cycles, crypto funds have kept pace with Bitcoin's gains. But here's the important part... they've done so with far less volatility than Bitcoin. And this is exactly what all investors hope for.

Crypto funds' ability to manage risk was never more clear than during 2018's "crypto winter". While Bitcoin's price fell 75% from its peak. Crypto funds lost less than 50%. I'm sure most investors don't cheer a 50% loss - my myself would not be happy either, but they likely took solice knowing had they been fully exposed to Bitcoin they would have lost far more.

So returning to the [under]performance question it depends on what exactly are you looking for - maximum performance or good sleep at night sacrifying few basis points for risk management. Still, crypto funds are a risky investment and most suitable for institutions and sophisticated investors. Thus, have a double or even triple eye when selecting particular fund and stay well invested.