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The Future Of Crypto Currencies And Falcon Crypto Funds

27-April-2020 20:42
in General
by Benny Menashe


Cryptocurrency Trading was initially viewed with suspicion by many traditional traders but, since then, cryptocurrency (such as Bitcoin, Ether etc) has long ago shaken off its image problem. The world of virtual currency trading has evolved from a niche investment, which frequently lacked the controls and infrastructure necessary for safe, regulated investment, through to a commodity which today is eminently suitable as part of a balanced portfolio. Here we take a look at the current state of the cryptocurrency market, the attractiveness of cryptocurrency as an investment and how recent evolutionary changes have contributed to its increasing popularity.

Although the days when the cryptocurrency market was strictly the preserve of small-scale or maverick investors is over, there is still some way to go before cryptocurrency achieves the same status as major commodities. The past volatility of the currencies, as well as the previous lack of regulation and the formally uncertain reputation of cryptocurrency meant that many investors stayed clear. Now that time has moved on, the recent market activity shows that even major investment banks and hedge funds are taking a renewed interest in crypto, for example recent regulatory filings of Renaissance Technologies LLC, a hedge fund heavyweight, shows institutional interest in bitcoin. In a large part, this is down to the undoubted profitability of cryptocurrency investment, both in the short, medium and longer term. A number of banks and trading companies have reported to be devoting resources to developing specialist teams to trade with it effectively. Specialist cryptocurrency trading firms have been set up to exploit the significant potential which cryptocurrency presents.

Commentators suggest that crypto delivers the biggest return of any asset group - a fact which major traders are taking notice of. A survey on Eurekahedge indicated returns for cryptocurrency funds as high as 16%; in comparison, the return from traditional hedge fund strategies being in the region of 10.4%. In addition, as cryptocurrency has become more widespread, the infrastructure allowing more sophisticated trade has also increased proportionally. The net result is an asset which is now standing up to be counted alongside traditional trading options.

For many governments cryptocurrency initially represented a major threat on several fronts. Their concerns were predominantly around tax avoidance and criminal activity; cryptocurrency doesn't fall within a specific jurisdiction and transactions can be conducted anonymously, including money laundering and illegitimate purchases on the dark web. Over the past decade, since the inception of bitcoin, governments across the globe have slowly caught up and have put in place legislation relating to cryptocurrency. In the UK, for example, cryptocurrency profits are subject to capital gains tax, although tax liability depends on the nature of the cryptocurrency transactions under consideration. Further to that, cryptocurrency transactions should be conducted in line with Financial Conduct Authority (FCA) regulation. These protocols have only come about recently: HMRC's initial brief came out in 2014 and the process of regulatory consolidation with respect to cryptocurrency regulation is still in progress.

For a concept that embodies freedom from the boundaries, costs, restrictions and regulation which governs the mainstream trading market, it seems almost paradoxical that an enterprise has sprung up which purports to represent stakeholders in the global blockchain ecosystem. However that's exactly what's happened through the formation of cryptocurrency Valleys. Originating in Switzerland, cryptocurrency Valley's mission is, "fostering growth, collaboration and integrity in the global blockchain economy". Celebrating the value which a de-centralised currency can bring globally, the aim of the organisation is to promote networking, collaborative working and the value of cryptocurrency in a wide range of different applications.

Although only a decade old, cryptocurrency has come a long way, from a novel, almost subversive concept, the blockchain economy has begun to be recognised as a legitimate, viable asset that has enormous trading potential. The excellent return it has proven to deliver over time means that, despite pricing volatility, it is an attractive trading commodity. Enterprises such as cryptocurrency Valley, are growing regulation and an increasing number of well-known companies are taking an interest in the possibilities which cryptocurrency presents. This all points towards a fresh approach to the cryptocurrency market.

During extreme global events, such as we are experiencing now, traditional stocks and commodities have plunged, with the S&P down by 20%, cryptocurrencies have fared much better and have very much performed like gold, bitcoin up by 80% since mid-March and volatility has hit three-month lows. Cryptocurrencies appeal to investors as they can offer a potential high risk-reward.

Falcon Investment Management Ltd is a London-based full scope AIFM multi-strategy investment manager, focused mainly in highly liquid investment strategies through our range of multi-manager solutions. Falcon launched its first cryptocurrency arbitrage fund in Februay2019 with seasoned finance professionals with trading pedigrees in traditional assets and commodities, it has since made well into double-digit gains last year. Based upon the success Falcon launched it’s second cryptocurrency systematic fund in March 2020 with former investment bankers from Morgan Stanley and Goldman Sachs. For more information please contact