In the first half of 2023, Bitcoin’s classic “buy and hold” strategy outperformed most crypto funds by a significant margin, according to a report by Switzerland-based investment advisor 21e6 Capital AG. Despite crypto funds historically outperforming Bitcoin during bull runs, they struggled this year due to cautious approaches and high cash reserves stemming from market challenges in late 2022.
H1 2023 Performance:
While crypto funds achieved an average return of 15.2%, Bitcoin witnessed gains of approximately 84% during H1 2023. 21e6 Capital AG’s head of marketing, Maximilian Bruckner, acknowledged that in previous bull markets, crypto funds had often outperformed Bitcoin, but this year’s conditions posed unique challenges.
Crypto funds on average generated 15.2% return in the first half of 2023 lol pic.twitter.com/vb8pwYfiX9
— Alex Krüger (@krugermacro) August 5, 2023
Impact of Cash Reserves:
After the crypto market upheaval in 2022, many funds became risk-averse, accumulating significant cash buffers. This cautious stance led to missing out on the substantial BTC price rally in H1 2023. The report highlighted that funds with substantial cash positions tend to underperform Bitcoin during bullish periods unless their assets outperform Bitcoin significantly.
Underperformance and Challenges:
The challenging environment in 2023 affected both major altcoins and crypto funds, making it tough for the latter to outperform Bitcoin. Funds with heavy exposure to altcoins, futures, or those heavily reliant on momentum signals saw relatively weaker performance.
The report emphasized monitoring leading futures providers and the funding rates in crypto futures markets. Additionally, the ability of quantitative funds to capture market trends would be a focal point for observation in the future.
While the report indicated a slight improvement in investor sentiment during H1 2023, a complete recovery was yet to occur. Some funds might consider reinvesting more cash into the crypto sector, but current data on inflows and outflows suggested caution still prevailed.
In summary, BTC’s “hodlers” were the winners in H1 2023, outperforming crypto funds by 69%. The funds’ underwhelming performance was attributed to their risk-averse strategies and substantial cash holdings, missing out on the impressive BTC price rally. Despite positive results, funds still struggled to beat Bitcoin, especially those with significant exposure to altcoins or futures. The report highlighted the importance of monitoring futures providers and funding rates for future success. While investor sentiment showed signs of improvement, a full recovery was yet to be seen.