In the first half (H1) of 2023, the classic buy and hold, or hodl, strategy for Bitcoin (BTC) outperformed most crypto funds by an impressive 68.8%.
According to data from 21e6 Capital AG, a Switzerland-based investment adviser, crypto funds, on average, generated returns of 15.2% during the same period, while BTC saw gains of around 84%.
Maximilian Bruckner, the head of marketing at 21e6 Capital AG, noted that crypto funds have previously been able to outperform Bitcoin in bull markets.
However, their lackluster performance in 2023 was attributed to challenging market conditions and the large cash reserves they held at the end of 2022.
After the collapse of FTX and other crypto projects in 2022, many crypto funds decided to reduce risk and build cash buffers.
Unfortunately, this move caused them to miss out on significant BTC price rallies in H1 2023. The report indicated that funds with substantial cash positions tend to underperform in a bull market, unless their assets perform significantly better than Bitcoin.
The general sentiment following the events of 2022 led to larger-than-normal cash positions for many funds, and most major altcoins also underperformed Bitcoin during this period, making it a challenging environment for them.
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At the time of writing, BTC was priced at roughly $29,000 and struggled to hold above the $30,000 level, which was only briefly surpassed a couple of times in 2023.
Despite this, the current price marked a 75% gain since January 1, as per CoinGecko data.
The report acknowledged that all crypto fund strategies achieved positive results in 2023, but they underperformed when compared to Bitcoin, especially those with significant exposure to altcoins, futures, or those relying heavily on momentum signals.
Looking ahead, the report highlighted that monitoring the leading futures providers and the funding rates in crypto futures markets, as well as the ability of quantitative funds to capture trends, would be crucial areas of focus for market observation.
The investor sentiment showed slight improvement over H1 2023, suggesting that some funds might consider allocating more cash into the crypto sector.
However, the report cautioned that full sentiment recovery had not yet taken place, as indicated by current data on inflows and outflows.
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