The prevailing wisdom is that hedge funds aren't touching bitcoin. Sure, there are a few special funds devoted solely to cryptocurrencies, but managers outside this group can't get over bitcoin's many foibles: its volatility, its insecurity, the risk of getting hacked, the prevalence of fraud, even its sheer novelty. "To be honest, I just don't know enough about it," a 16-year hedge fund veteran told CNBC last week – anonymously, of course.
But that perception might be off. They might be keeping quiet about it, but a definite number of hedge funds have tasted of the forbidden fruit – and they were not displeased. From HFR's May hedge fund performance update:
Macro was led by the HFRI Macro: Currency Index, which vaulted +3.5 percent, the strongest month return since inception, bringing YTD performance to +8.2 percent. In addition to contributions from Euro, Swiss Franc, New Zealand Dollar and Korean Won, the Currency Index also had strong contributions from exposure to digital currencies.
May was not a bad month to be long BTC, which rose, as any good currency should, 64 percent over the month. The fact that the world's largest-ever ransomware attack occurred that month, directing hundreds of thousands of victims to send bitcoin bounties, might or might not have helped matters. Regardless, bitcoin has had an extremely bitcoin time as of late.
There's no telling how much current hedge fund interest bitcoin is attracting, or how many more funds might pile in. Surely there are plenty of managers out there whose attitude toward cryptocurrencies is something along the lines of “she's trouble, I know it.” But others probably can't restrain themselves. They like trouble. Just look at that chart up there. It beckons.
And we can only imagine there's some growing interest in something like, say, this.