The closure of Asymmetric Capital’s Liquid Alpha Fund has drawn attention to the struggles of liquidity-focused funds in the volatile cryptocurrency market.
Challenges for Liquidity-Focused Crypto Funds
The Liquid Alpha Fund has faced a 78% loss since the beginning of the year, despite Bitcoin's 28% rise. The fund's founder Joe McCann noted that strategies meant for high volatility no longer benefit investors. Experts attribute these challenges to poor asset selection, leverage usage, and inadequate risk management.
Performance Gaps in Crypto Funds
According to Galaxy Digital’s VisionTrack index, funds focused on fundamental strategies were down by 13.7% by the end of June, while the composite index saw a 6.3% decline. Although market-neutral and quantitative strategies showed slight gains, the altcoin market faced a steep average decline of 40% in the first half of the year. Cosmo Jiang from Pantera highlighted that due to contractual obligations, many funds couldn’t hold Bitcoin, making comparisons with underperforming altcoins invalid.
Shifting to Fundamentally Strong Assets
Rajiv Patel-O’Connor from Framework Ventures commented on the unexpected transition from speculative memecoins to fundamentally-oriented investment strategies, leaving non-revenue-generating coins stagnant. Rob Hadick from Dragonfly predicted that while low-quality coins with wide exchange distribution might rise in the short term, fundamentally strong projects will stand out in the long run. Patel-O’Connor emphasized, 'Coins must generate revenue.'
The closure of the Liquid Alpha Fund highlights the need for investment strategies to adapt to new market conditions and the importance of selecting resilient assets.
