Hedge Fund Research, or HFR, has developed two indexes that track the performance of fund managers that invest in cryptocurrencies and Blockchain technology. For the month of June, its cryptocurrency index dropped 23%, which puts it down 49% in the first half of the year. Its Blockchain index declined 22% in June and is also lower by 49% this year. So far in 2018, the two indexes moved lower in five of the six months with April being the only month with a positive return.
[Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]
[Author’s note: There is no official price for Bitcoin, so I use round numbers and reference Yahoo! Finance data.]
HFR doesn’t disclose which fund managers it tracks that invest in cryptocurrencies or Blockchain technology, but the indexes had the same composition until July last year. That was the timeframe that there were enough fund managers focusing on the space.
Fund managers slightly beating Bitcoin’s performance. But still down by almost 50%
For the first six months of this year Bitcoin fell 54% to $6,385. While the fund managers that HFR tracks beat Bitcoin’s performance, being down 49% in six months isn’t something to get excited about.
As can be seen in the chart below from StockCharts.com, Bitcoin has been in a downtrend since it hit its all-time high of $20,000 in December last year . While the two blue lines have different slopes, the cryptocurrency has been making a series of lower highs and lower lows.
The blue circles in the top portion of the chart show Bitcoin’s Relative Strength Index or RSI. When it gets close to or below 30 it is in an oversold condition. While the cryptocurrency has moved higher after hitting that mark, it has been more of a dead cat bounce than a sustained rally. Until Bitcoin can make break the trend it is still exposed significantly downward.
Tom Lee is still sticking with Bitcoin hitting $25,000 by year-end
Tom Lee is one of the most visible analysts following Bitcoin and digital currencies. As Co-founder and Head of Research at Fundstrat Global Advisors, he has compiled an extensive amount of data on them. He is still sticking with his forecast that Bitcoin should hit $25,000 by the end of this year. One of the reasons is that the cryptocurrency has bounced back from previous downward moves.
In the chart below Lee shows where Bitcoin has suffered two previous 65% downward moves. In each occurrence the cryptocurrency has had strong price appreciation. The percentage gain was larger in the first instance (around 250%), but one reason for that is probably due to the digital currency trading in single digits at that time. The second time the gain was about 50%.
If Bitcoin is able to get to $25,000 it would generate a 290% gain , which is not out of the realm of possibility given its volatility. However, it will need a few catalysts to get there.