Pump-and-dump schemes, prevalent in over 90,000 Ethereum projects, are eroding confidence in the DeFi sector by exploiting liquidity and inflating profits, casting a shadow on the cryptocurrency industry’s integrity.
The world of cryptocurrency is like the Wild West, but it’s slowly becoming more like traditional finance. But in decentralized finance, or DeFi, it’s still pretty wild. People often trade in risky ways, leading to scams and unfair trading.
In a scam called a pump-and-dump, someone or a group lies to make people excited about buying a token. They say things that aren’t true to make people afraid of missing out. Then, while others start buying, they sell their own shares for a higher price.
So far, people have created over two million different cryptocurrencies. But many of these are no longer used.
According to a Chainalysis report, in 2023, more than 370,000 new tokens were created just on the Ethereum network. Out of these, 168,600 were listed on decentralized exchanges, where people can trade them.
The report found that many Ethereum tokens show signs of being messed with in the market.
Usually, less than 1.4% of new tokens get more than $300 in trading activity right after they launch. Only 5.7% of the tokens started in 2023 on Ethereum have done better than this.
Also, the research points out that about 90,408 tokens didn’t get more than $300 in trades. And there was at least one case where someone took out more than 70% of a token’s trading money in one go, after buying it five times before.
While this doesn’t prove these tokens were all used in scams, it does show how experts can use the data from the blockchain to find fishy patterns.
The entities that launched these tokens made around $241.6 million in profit in 2023.
This doesn’t include the costs to set up and start their projects. Some of these people launched many tokens. For example, one person started 81 different tokens and made about $830,000.
How can unfair trading stop?
Make cryptocurrency rules clearer to prevent unfair trading.
Understand that crypto trading happens across many platforms, not just one, requiring a broad view for effective regulation.
Regulators should learn how the crypto market is evolving to better combat insider trading.
Increase oversight in the crypto space, similar to the stock market, to deter unethical practices.
Crypto exchanges should provide clearer warnings to their users about the risks of insider trading.
Develop and implement stricter regulatory measures for both centralized and decentralized exchanges.
Encourage transparency and ethical practices among those launching new tokens, especially with memecoins.
Consider the long-term impact of allowing pump-and-dump schemes on the credibility and stability of the crypto market.
Crypto integrity and oversight
Many can see how all these events, such as DeFi scams and unregulated trading, can hurt the crypto world’s reputation.
A solution would be to have an independent or clear third-party check for bad practices.
It’s hard to catch wrongdoers in crypto because the laws are not clear.
People choose crypto to avoid traditional banks, which they might not trust. But if crypto faces the same problems as banks, people might go back to banking. To gain more users, the crypto community must stop these bad practices.
Depending on your geographical location, you might have laws that have your back.
Laws like the European Union’s Markets in Crypto-Assets Regulation (MiCA) can help. They set rules and punishments to prevent wrongdoing, which could reduce fraud in the industry.
The rise of the influencer-led crypto projects
Unlike startups that need time to grow before offering shares, memecoin projects can explode overnight, often inspired by online jokes or trends.
Insiders might use secret tips to make fast, large profits by buying before big news breaks, pushing up the price of their holdings.
Starting with only 1.5 $SOL($92), this trader made $2M in 22 days, a gain of 21,715x!😱
This trader spotted $SILLY 5 minutes after it opened trading and spent 1 $SOL($62) to buy 43.1M $SILLY.
Services like Lookonchain can spot these activities, such as a case where someone turned a small investment in Solana’s token into $2 million by trading just five minutes after market launch.
Some crypto influencers push hasty decisions that can lead to losses, as they may profit from hyping certain projects. Regulators try to control this by targeting promoters, but often, the main culprits remain untouched.
The U.S. Securities and Exchange Commission has taken legal action against celebrities, like Kim Kardashian, for unauthorized crypto promotions, with the SEC’s Chair warning against such activities in 2023.
How to avoid pump-and-dump schemes in crypto
Despite efforts, regulators struggle to control crypto pump-and-dump and insider trading.
Chainalysis’s study shows gaps in enforcement. This might mean that the regulators could try to apply traditional finance protections to crypto. However, unclear laws and guidelines hinder this.
Authorities usually track back from victims, but social media complicates matters. Catching and prosecuting wrongdoers is necessary to stop them from exploiting the system.
The good news is that a simple blockchain analysis can trace stolen funds. However, setting up a capable regulatory team remains a challenge.
On-chain analysis can reveal who owns most of a token, which might indicate a scheme. Overall, transparency, which is unique to blockchain, can assist in monitoring.
Preventing scams requires investor education and skepticism. Self-research and cautious investing are essential. The sector’s growth relies not just on big firms entering but on protecting individual investors in DeFi. Always exert caution, especially with new, quickly rising tokens.
The European Central Bank announces a decisive move towards introducing a digital euro. This initiative will enhance privacy, increase competition in the payment sector, and ensure financial stability.
Piero Cipollone, a top official at the European Central Bank (ECB), recently talked to a group of European lawmakers about getting ready to create a digital version of the euro. He mentioned four main challenges they need to tackle and assured that the ECB is working to ensure that everyone can use this new digital currency without having to pay for it.
Cipollone explained that the ECB is already looking for companies that can help build and support this new digital euro. He said it’s important to start looking for these companies now, before they officially decide to introduce the digital euro.
This way, they won’t be behind schedule. He also mentioned that any agreements they make with these companies will be flexible, taking into account future laws and technology changes.
Moreover, he mentioned that only companies based in the EU, or those controlled by EU citizens, will be allowed to be part of this project.
Partners for the digital Euro
This could be a big moment for Amazon because it was picked to help design a sample online shopping feature for the digital euro, but now they are looking for more applicants for the project.
Piero Cipollone also talked about the rules for using the digital euro. He described it as a single set of guidelines and standards that will make sure the digital euro works smoothly everywhere. According to Cipollone, the digital euro should be as straightforward to use as cash.
This would mean people wouldn’t have to rely on big international companies to make payments and everyone in the euro area would get the same level of service.
Cipollone likened the system supporting the digital euro to railway tracks.
Just like tracks can be used by many different train companies but are owned by the government, the digital euro system would be open for various businesses to use while being controlled by the state.
There is no need to make the digital Euro a legal tender
On February 15, a group called the European Money and Financial Forum, which is independent and not-for-profit, released a study. This study pointed out some tricky legal problems that could come up if the digital euro is made a required form of payment.
It was especially concerned about how this decision could affect companies that handle payments and are part of the euro payment system. The study also criticized the idea of making something a required form of payment, calling it an outdated concept.
To make sure the digital euro doesn’t upset the financial system, Piero Cipollone said they’re adding some safety measures to its design. For instance, the digital euro won’t earn interest, so it won’t compete with banks where people save their money.
There will also be limits on how much digital euro individuals can hold, and businesses and financial institutions won’t be allowed to keep it.
However, people will be able to connect their digital euro wallets to their bank accounts. This means they can make transactions directly without needing to move money into their wallets first.
Cipollone also mentioned privacy with the digital euro, promising that it would allow for very private online payments, more private than what’s currently available through commercial services.
Will cash still be in use after the release of the digital Euro?
Cash will still be available, and when you pay with the digital euro without using the internet, it will be just as private as using cash.
Only the person giving the money and the person receiving it will know the details of the transaction.
When paying online, the European Central Bank (ECB) will only get a very small amount of data that’s been disguised to protect identities.
This data is only for necessary actions like completing the payment.
Plus, users will have more control over their personal information than they do with private payment services. The digital euro will also have the best protection against online threats.
ECB’s timeline for the digital Euro
The European Central Bank (ECB) is taking careful steps towards introducing the digital euro, with the project currently in the research and development phase.
While specific dates for the full rollout are yet to be announced, the ECB has indicated a phased approach.
Initial experiments and prototypes are being tested to ensure the digital euro meets high standards of security, efficiency, and accessibility.
Following this, a pilot phase could be launched to test real-life applications, expected to take several years to complete.
The final introduction of the digital euro to the public would only occur after successful trials and adjustments based on feedback.
This cautious approach ensures that once launched, the digital euro will be ready for widespread use across the eurozone, providing a seamless and secure digital payment option for all citizens.
Ultimately, the final decision to introduce the digital Euro can only be taken after the entire EU adopts a legislative framework.
What’s the best Ethereum wallet? Well, it depends on several factors, such as your specific needs, security preferences, and how you plan to use your Ethereum.
Whether you’re looking for the best Ethereum miner software to earn tokens, a simple way to manage your assets with an Ethereum paper wallet, or a robust online service for easy access and transactions, there’s an Ethereum wallet out there that fits your needs.
Before choosing a wallet, let’s have a look at some of the most popular Ethereum wallets worldwide.
What is an Ethereum wallet?
An Ethereum wallet is a digital tool that lets you interact with your Ethereum blockchain network.
Think of it as an internet banking app, but for Ethereum. You can use it to check your balance, send and receive funds, and connect to applications. It’s essential for managing your Ethereum tokens and engaging with the vast world of decentralized applications (dApps) on the Ethereum blockchain.
To create an Ethereum wallet, you can download software from trusted sources or use an online platform that lets you generate a new wallet. The best Ethereum wallets offer a mix of security, user-friendliness, and features, such as offline capabilities for added security or integration with hardware wallets like Ledger for even more protection.
An Ethereum wallet is a crypto wallet that supports the Ethereum blockchain. It’s also a necessary step if you want to interact with the increasing number of dApps in the DeFi world. Having an Ethereum wallet will enable you to connect to decentralized exchanges, such as UniSwap, and trade crypto without having to interact with centralized exchanges. Most crypto investors prefer to hold their funds in a non-custodial wallet, which helps them preserve their anonymity.
While there is no way to determine the actual number of Ethereum users, it is possible to verify the number of unique addresses on the Ethereum blockchain.
These addresses stand as unique wallets, as each crypto wallet is associated with an address. Of course, one user could set up an infinite number of wallets. But an increasing number of wallets can also be associated with an increased number of users.
As of February 2024, there are 258.08 million unique Ethereum addresses, and each is associated with a distinct Ethereum wallet. According to YCharts, this represents a 15.99% increase since last year.
Ethereum wallets can be categorized into several types, each offering different features and levels of security. Here’s a list of the types of Ethereum wallets available:
Hardware wallets. Secure physical devices designed to store your cryptocurrency’s private keys offline. They are highly recommended for storing large amounts of Ethereum securely. Examples include Ledger and Trezor.
Software wallets. These wallets are digital and can be further divided into three main types based on their platform:
Desktop wallets. Applications you download and install on your computer. They offer a good balance between security and convenience, allowing full control over your assets.
Mobile wallets. Apps for your smartphone, providing easy access and the ability to manage your Ethereum on the go. Ideal for everyday transactions.
Web wallets. Accessible through internet browsers and can be hosted or non-hosted. While they offer convenience for transactions and trading, they may be less secure than other options due to the risk of online attacks.
Paper wallets. Essentially a physical printout of your public and private keys. It’s a form of cold storage (offline) and is very secure against online hacking, but it requires careful handling to avoid loss or damage.
All these types of Ethereum wallets are commonly referred to as non-custodial wallets, as you’re the only one who has access to them.
In contrast, custodial wallets are actually crypto accounts on centralized platforms, such as Binance or Coinbase. These present more risks, as the platform also has access to your funds and are more prone to hacking and potential losses. Since we are talking about Ethereum wallets, and not accounts, all the wallets presented in our selection are non-custodial wallets.
Best Ethereum wallet
MetaMask
Type: Software Wallet (Browser and Mobile App)
MetaMask is a versatile digital wallet offering a user-friendly platform for managing digital assets, interacting with decentralized applications, and supporting a wide range of Ethereum and EVM-compatible blockchains. Ideal for both beginners and developers.
Coinbase Wallet
Type: Software Wallet (Web and Mobile App)
A self-custody wallet from the leading cryptocurrency exchange, Coinbase Wallet allows users to store a wide variety of cryptocurrencies and access Ethereum-based DeFi apps, emphasizing ease of use and security.
ZenGo
Type: Software Wallet (Mobile App)
ZenGo is a next-gen crypto wallet using MPC technology for enhanced security, eliminating traditional vulnerabilities like seed phrases. It’s user-friendly and supports a broad range of cryptocurrencies.
Trezor
Type: Hardware Wallet
Trezor provides top-notch security by storing cryptocurrency offline. It supports a vast array of cryptocurrencies and offers a user-friendly interface for managing assets securely.
Ledger
Type: Hardware Wallet
Ledger wallets are known for their robust security, supporting over 5,500 cryptocurrencies. They provide offline storage and a range of services through the Ledger Live software, suitable for a wide range of users.
How to choose the best Ethereum wallet for you?
Choosing the best Ethereum wallet depends on your priorities: security, convenience, or a balance of both.
Here’s how to make the right choice:
Security. If safeguarding your assets is top priority, consider hardware wallets like Ledger or Trezor. They store your keys offline, away from online threats.
Convenience. If you frequently trade or use Ethereum for transactions, software wallets (web, mobile, or desktop) like MetaMask or Coinbase Wallet offer easy access and are user-friendly.
Functionality. Look for wallets that support the features you need, such as DeFi access, NFT storage, or integrated exchanges for easy trading.
Compatibility. Ensure the wallet supports Ethereum and any other cryptocurrencies you’re interested in.
Reputation and reliability. Choose wallets with a proven track record and positive user reviews. Research their security history and updates.
Ownership. Decide if you want full control over your keys (non-custodial) or if you’re comfortable entrusting them to a third party (custodial). The list provided above offers the best options for non-custodial wallets.
By considering these factors and identifying what matters most to you—whether it’s impenetrable security, the convenience of quick transactions, or a specific set of features—you can select the Ethereum wallet that best fits your needs.
As the International Energy Agency (IEA) forecasts, AI’s energy consumption is poised for an explosive increase, overshadowing even the substantial growth in crypto’s energy use. Despite AI’s burgeoning demand, the spotlight remains on cryptocurrency for its significant energy footprint.
The global electricity market is going through major changes.
This is mainly because the energy industry is at the forefront of reducing carbon emissions and adapting to new ways of using power.
Two areas that are expected to change how much energy we use are cryptocurrency mining and artificial intelligence (AI). The International Energy Agency (IEA), a big organization made up of many countries, believes these changes will happen in the next few years.
According to the IEA’s report for 2024, which offers a forecast until 2026, there’s some good news about energy use.
Right now, making electricity is the biggest reason for carbon dioxide (CO2) emissions worldwide. But, this sector is also leading the charge towards zero emissions.
By 2025, renewable sources like wind and solar are expected to be the main way we generate power.
Energy use increased at a slower rate, going from 2.4% in 2022 to 2.2% in 2023. However, it’s predicted to jump to 3.4% by 2026. This increase will mainly come from countries like China and India.
At the same time, the amount of energy used by data centers, artificial intelligence, and cryptocurrency is expected to more than double during this period, going over 1,000 terawatt-hours (TWh). Notably, a third of all types of data centers are found in the United States.
According to the IAE rapport, electricity consumption is expected to rise up to 1,000 TWh by 2026.
Artificial Intelligence (AI) is set to lead in energy consumption, with its usage predicted to increase by ten times from 2023 to 2026. For example, just ChatGPT is expected to use almost 10 terawatt-hours (TWh) each year during this period.
To put that in perspective, every time someone uses ChatGPT, it uses about ten times more energy than a single Google search.
Bitcoin energy consumption was measured to be about 120 TWh in 2023.
This was part of the 130 TWh used for all cryptocurrency mining that year, which increased from 110 TWh in 2022.
At that time, cryptocurrency mining made up 0.4% of the world’s total energy consumption. The International Energy Agency (IEA) forecasts that by 2026, cryptocurrency mining will consume 160 TWh.
Data centres are now the main drivers of electricity demand growth in many regions
And electricity consumption from the sector — along with AI & cryptocurrency — could double by 2026
Even though the situation with energy use is changing and cryptocurrency mining only uses a small part of the world’s energy, the report points out that crypto is still worrying:
The report notes that it’s hard to reduce electricity use because any energy saved might just be used up by other things that need a lot of power, like different types of cryptocurrencies besides Bitcoin, even though some are getting more efficient.
It’s said that Bitcoin mining uses 54.5% sustainable energy. There’s an increase in mining activity as the Bitcoin halving approaches, leading many miners to invest a lot in new equipment.
To put things into perspective, let’s see what 1 TWH means in terms of normal consumption.
One terawatt-hour has enough energy to supply electricity to 70,000 homes in the United States for a whole year.
When comparing this to the energy use of entire countries, it means that the combined energy consumption of cryptocurrency and related users is expected to reach the same level as Japan’s consumption.
How can energy consumption be more efficient?
To make energy consumption more efficient, especially in data centers, several strategies and regulations are crucial.
Regulatory and policy initiatives
Regulatory measures. The European Commission’s revised Energy Efficiency Directive imposes regulations on the European data center sector to enhance electricity demand management. Starting in 2024, data center operators are required to report their energy use and emissions. Large-scale data centers must also incorporate waste heat recovery applications, when feasible, and aim for climate neutrality by 2030.
Efficiency standards. An EU regulation effective since 2020 sets efficiency standards for data centers, helping to control their environmental impact. The Climate Neutral Data Centre Pact, a self-regulatory initiative, aims for climate neutrality in the sector by 2030.
U.S. energy policies. The Energy Act of 2020 in the United States mandates studies on energy and water use in data centers. It encourages the development of efficiency metrics and best practices. The Department of Energy (DOE) is also focusing on producing more efficient semiconductors, which can reduce cooling requirements.
Chinese regulations. China requires data centers acquired by public organizations to improve energy efficiency and be fully powered by renewable energy by 2032, starting with a renewable energy share mandate of 5% in 2023.
Technological and operational innovations
Advanced cooling systems. Adopting high-efficiency cooling systems can significantly reduce electricity demand. Innovations like direct-to-chip water cooling and the use of specific low viscous fluids are promising.
Machine learning and AI. Utilizing machine learning, as Google did with its DeepMind AI, can optimize data center operations, significantly reducing electricity demand.
Quantum computing. In the long term, replacing supercomputers with quantum computers, which require less energy, could reduce overall electricity demand. However, efficient cooling systems are necessary due to their low operating temperatures.
Hyperscale data centers. Transitioning to Hyperscale Data Centers, which can handle large-scale operations without significantly increasing electricity consumption, is both sustainable and financially attractive.
Carbon-aware models. Software that allows for time and location shifting of electricity demand to regions with lower carbon intensity can significantly reduce emissions and operational costs.
By combining these approaches, data centers can significantly increase their share of carbon-free energy in total electricity consumption, as demonstrated in Google’s 2023 Environmental Report.
Crypto hedge funds have emerged as a pivotal player, offering a unique blend of traditional investment strategies and the thrilling potential of cryptocurrencies.
The sector is rapidly expanding, attracting both seasoned traders and newcomers intrigued by the fusion of blockchain technology with hedge fund acumen.
Let’s dive into the intriguing world of crypto hedge funds, exploring the top players, their strategies, and what it means to start a fund in this cutting-edge field.
What is a crypto hedge fund?
A crypto hedge fund is a specialized investment fund that specifically focuses on cryptocurrencies, similar to traditional hedge funds that invest in assets like stocks or bonds.
These funds are managed by professionals who aim to increase their value through different investment strategies.
These hedge funds invest in a variety of cryptocurrencies, not just the well-known ones like Bitcoin or Ethereum. They might also include other digital assets related to blockchain technology.
Don’t confuse a crypto hedge fund with a crypto ETF. The ETF is a type of investment fund traded on stock exchanges, much like stocks. It tracks the value of one or more digital tokens and offers a more passive investment approach. ETFs provide an easier entry point for the average investor, allowing exposure to cryptocurrencies without the complexities of direct trading or the higher minimum investment often required by hedge funds.
The hedge fund is managed by experts who understand the crypto market’s complexities. They use their knowledge to make informed decisions, aiming to grow the fund’s value.
Just like traditional hedge funds, these crypto funds use strategies to “hedge up” or protect against potential losses. This might involve diversifying investments or using advanced trading methods.
Some funds may specifically focus on investing in blockchain technology projects, not just cryptocurrencies.
Funds like 3AC and those associated with figures like Anthony Scaramucci have gained attention in the crypto hedge fund space.
These funds attract investors interested in crypto but who might not have the expertise or time to manage their own crypto investments.
Like any investment, there’s risk involved, and the regulatory landscape for crypto hedge funds is still evolving.
Crypto hedge funds list
There are many crypto hedge funds out there, some of which are well-known and have significant investments. You may come across lists showcasing the top or largest funds in this sector.
It’s important to note that the landscape is constantly evolving, and the size can be measured in various ways, such as assets under management, influence, or performance. Here’s a list to include:
The largest crypto hedge funds are:
Pantera Capital. One of the first U.S. Bitcoin funds, Pantera Capital has a strong focus on Bitcoin and other digital currencies, with a significant amount of assets under management.
Galaxy Digital Assets Fund. Founded by Michael Novogratz, this fund is known for its sizable investments and extensive involvement in the cryptocurrency space.
Polychain Capital. A leader in the field, Polychain Capital focuses on blockchain technology and has garnered significant investments from prominent venture capital firms.
Grayscale Investments. Known for its Bitcoin Investment Trust, Grayscale offers a range of digital currency investment products.
Bitwise Asset Management. Famous for creating the world’s first cryptocurrency index fund, Bitwise is a leader in crypto-based investment services.
BlockTower Capital. A well-known player in the crypto hedge fund market, BlockTower Capital employs a mix of professional investment practices and deep crypto knowledge.
Andreessen Horowitz (a16z) Crypto Fund. While more of a venture capital fund, a16z has a significant focus on crypto startups and blockchain technology investments.
Digital Currency Group. This company is not a traditional hedge fund but has significant investments in the cryptocurrency market and blockchain industry through various subsidiaries.
Crypto hedge fund that went bankrupt
Although Bitcoin was only invented in 2009, we have already witnessed the bankruptcy of several crypto hedge funds.
The bankruptcy of a crypto hedge fund typically occurs when it fails to manage risks effectively, leading to significant financial losses. This could happen due to a variety of factors like poor investment choices, unexpected market downturns, regulatory issues, or operational mismanagement.
The downfall of a crypto hedge fund can have wide-reaching implications.
For instance, it might result in substantial financial losses for investors, affect market confidence, and potentially lead to a stricter regulatory environment.
The story of a bankrupt crypto hedge fund often serves as a cautionary tale in the world of cryptocurrency investments, highlighting the inherent risks and the need for careful, informed decision-making.
In the case of notable bankruptcies like Three Arrows Capital (3AC) or Alameda Research, these events have become significant moments in the history of cryptocurrency, often discussed and analyzed for insights and lessons learned.
Alameda Research
Co-founded in September 2017 by Sam Bankman-Fried and Tara Mac Aulay, Alameda Research was much acclaimed for its trading, investments, and market-making in the cryptocurrency space.
In November 2022, following a series of financial challenges, Alameda Research, along with FTX and more than 130 affiliated entities, filed for Chapter 11 bankruptcy protection.
The company’s website was taken down, and Sam Bankman-Fried, the founder of Alameda Research, announced that the firm was winding down its trading operations and would close.
The entire scandal started with the collapse of the FTX exchange (once valued at $32 billion), also founded by Sam Bankman-Fried. His crypto empire collapsed in a matter of days, also exposing his associates, who eventually ended up condemned for fraud.
Former FTX CEO Sam Bankman-Fried
Three Arrows Capital (3AC)
Three Arrows Capital (3AC), a Singapore-based cryptocurrency hedge fund, was established in 2012 by Kyle Davies and Su Zhu.
Initially, the company focused on arbitraging foreign exchange derivatives before shifting to cryptocurrencies in 2017.
3AC grew rapidly, becoming one of the most prominent crypto hedge funds. It engaged in significant investments in various blockchain projects and claimed a net asset value of $18 billion.
However, the fund faced challenges in 2022 due to the broad decline in cryptocurrencies, particularly its substantial investment in LUNA (on Terra blockchain created by the infamous Do Kwon), which collapsed to near zero.
In June 2022, the fund’s troubles intensified as it failed to meet its margin calls and repay loans, leading to a court-ordered liquidation in the British Virgin Islands. This failure had a ripple effect on the crypto market, contributing to the bankruptcy and difficulties of other crypto firms.
The founders, Davies and Zhu, faced legal issues, with Zhu being arrested in Singapore for failing to cooperate with the liquidation process. Their last known venture was starting Open Exchange, a new crypto-related project in Hong Kong.
Crypto hedge fund companies
Crypto hedge fund companies are specialized investment firms that concentrate on cryptocurrencies and blockchain-related assets. These companies employ a range of investment strategies to generate returns from the highly volatile and rapidly evolving crypto market.
Their approaches can vary widely, from conservative, long-term holdings of major cryptocurrencies like Bitcoin and Ethereum to more aggressive tactics like high-frequency trading or investing in initial coin offerings (ICOs) and emerging digital assets.
These firms are often characterized by their deep expertise in both finance and technology, enabling them to navigate the complex and often technically demanding landscape of cryptocurrency investments. They attract investors who are interested in gaining exposure to the crypto market but may lack the time or expertise to manage their investments directly.
However, you can always choose to do your own research before investing.
Organizations like PricewaterhouseCoopers (PwC), a prominent global network of audit and consultancy firms, frequently release reports on the crypto hedge fund industry. These reports provide valuable insights into the trends, performances, and overall health of the sector.
These insights are crucial for investors, fund managers, and other stakeholders in the crypto industry. They offer a comprehensive overview of the market, highlighting both opportunities and risks. Moreover, they serve as a barometer for the maturity and evolution of the crypto investment space, reflecting how traditional financial practices are adapting to the new digital asset class.
It’s also important to always research the company offering the hedge fund to avoid any future surprises. For instance, according to the 2023 PwC report, 12% of crypto hedge funds are considering relocating from the US to crypto-friendly jurisdictions. This might mean that potential investors should pay a closer look to the way existing regulations are applied by the hedge fund company.
Yes, you can start a crypto hedge fund. However, this is a complex process that requires thorough planning, legal compliance, and expertise in both finance and cryptocurrency markets.
Here’s a simplified guide on how to start a crypto hedge fund:
Define the fund’s focus. Decide on the specific cryptocurrencies and strategies your fund will target. Consider whether you’ll focus on major cryptocurrencies, a mix of assets, or specific geographic regions.
Legal structuring. Choose an appropriate legal structure for your fund, like a limited partnership or LLC, and consider the tax implications. Popular jurisdictions for registering crypto funds include the Cayman Islands, the USA, and Singapore.
Obtain licenses & ensure compliance. Depending on your location, obtain the necessary licenses and ensure compliance with regulatory bodies like the SEC in the USA or the Monetary Authority in Singapore. Implement strict KYC and AML procedures.
Raising capital. Develop a marketing strategy to attract investors, focusing on both crypto-native VCs and traditional investors. Prepare a compelling pitch and transparent terms.
Investor relations & reporting. Maintain clear communication with investors, providing regular performance statements and transparency in operations.
Assemble a skilled team. Hire professionals with expertise in trading, compliance, legal matters, and technology. The team should include portfolio managers, compliance officers, and legal experts.
Develop an investment strategy. Outline your approach to asset selection and portfolio construction. Implement risk management strategies and choose reliable trading platforms for executing trades.
Infrastructure setup. Establish a robust trading and storage infrastructure, focusing on security to protect against theft and hacking. Implement risk management systems and analytics tools for performance tracking.
Operational management. Set up efficient back-office functions for accounting, reporting, and administration. Choose a reputable asset custody solution.
Performance evaluation. Regularly evaluate the fund’s performance against set KPIs and adjust strategies as necessary.
Is it wise to invest in a crypto hedge fund?
In essence, a crypto hedge fund operates much like a traditional hedge fund but focuses on the dynamic and emerging world of cryptocurrencies and blockchain technology.
It’s a way for investors to engage with the crypto market through a managed, potentially more strategic approach.
Investing in a crypto hedge fund can offer exposure to the dynamic and potentially lucrative world of cryptocurrencies, leveraging the expertise of professional fund managers.
However, this investment carries significant risks due to the inherent volatility of the crypto market, the evolving regulatory landscape, and the technical complexities of digital assets. It’s crucial for potential investors to assess their risk tolerance, conduct thorough research, and consider the fund’s track record and management strategy before investing.
As with any investment, diversifying and not investing more than one can afford to lose is key to mitigating risks.
For a more detailed understanding and current insights, it’s advisable to consult financial experts and stay updated with the latest market trends.
Venezuela’s Petro cryptocurrency, set to cease operations on January 15 after six years. Launched as a countermeasure to U.S. sanctions, the Petro struggled with acceptance both domestically and internationally, ultimately failing amidst widespread scandal and operational challenges.
Venezuela’s Petro will stop working
Venezuela‘s government-made cryptocurrency, the Petro (oil-tied), will stop working on January 15, 2024.
The Petro started in 2018 to help Venezuela avoid U.S. sanctions, but it wasn’t used much.
The government’s Petro website (https://www.petro.gob.ve/) announced it’s closing, but that website isn’t working now. The Petro was only traded on a special part of the Venezuelan Patria website, which needs a password to get in.
The Petro was made because Venezuela’s regular money, the bolivar, lost a lot of value due to U.S. sanctions. Bitcoin was already popular in Venezuela when the Petro came out. President Nicolas Maduro wanted the Petro, but the parliament didn’t agree.
The Petro was fully working by 2020, but other countries didn’t use it, even though Maduro tried to promote it to the Bolivarian Alliance for the Peoples of Our America country members.
It was also not widely used in Venezuela. We should also note that Pedro was never made legal tender, so many didn’t see it as official money. Venezuela’s biggest bank didn’t take it unless forced by a presidential order.
The National Superintendency of Crypto Assets oversees Pedro and its ties to drug trafficking
In June 2020, U.S. authorities offered a $5 million reward for capturing Joselit Ramirez Camacho, who was in charge of the National Superintendency of Crypto Assets and, inherently, of the Petro.
Camacho is accused of being involved in drug trafficking.
They say he’s closely connected to suspected drug lords, including former vice president Tareck El Aissami.
Ramirez’s bounty is the lowest among the people the U.S. is after in this case. The U.S. is offering $15 million for Maduro and $10 million for others, including El Aissami.
Ramirez Camacho was arrested in Venezuela in March 2023 for financial issues in the oil industry. The agency he led was closed for changes and won’t reopen until March 2024. This led to the shutdown of some cryptocurrency exchanges and mining in Venezuela.
The Petro was different from a central bank digital currency, which is a type of official digital money. Venezuela’s Central Bank talked about making one in 2021, but it never happened.
Venezuela’s CBDC
In October 2021, the Central Bank of Venezuela announced that it will introduce a digital version of its currency, the bolivar, and will also remove six zeros from it because of high inflation.
This digital bolivar was to be used in the economy, and there will be a new 1-bolivar coin and banknotes from 5 to 100 bolivars.
The Central Bank also wanted to introduce a text message-based system for easy payments and transfers with this digital currency. They say this big change won’t affect the bolivar’s value; it’s just to make using the currency easier. The bank stated, “The bolivar’s value won’t change; we’re just simplifying it.”
— Banco Central de Venezuela (@BCV_ORG_VE) August 5, 2021
President Nicolás Maduro first mentioned a digital bolivar in February 2021. He was promoting this project as part of modernizing and fixing the economy.
Removing zeros from the bolivar, Venezuela’s actual legal tender is a common tactic of Maduro’s government. However, this doesn’t solve the issue of the economy.
By 2020, the yearly inflation rate was about 2,300%.
However, economists criticized this plan and pointed out that just changing the currency’s look doesn’t fix the real problems causing its loss of value.
Venezuela has been struggling with a long economic crisis, worsened by U.S. sanctions and very high inflation. Maduro’s solution to avoid these sanctions was to create digital currencies.
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