A boom in decentralized finance (DeFi) has generated turbo-charged returns for Pantera Capital's bitcoin and other cryptocurrency hedge funds this year. From 1 January to 31 August, the bitcoin fund (quotation Pantera's BTC) gained 61%, its digital asset fund 168%, its initial coin offering (ICO) fund 323%, and its long-term ICO fund grew 270%, according to a letter. addressed to investors sent a few days ago. The situation shows how bitcoin tends to be correlated with alternative cryptocurrencies, called altcoins, and how some investors are recovering from the 2018 and 2019 cryptocurrency market downturn with DeFi investments.
DeFi boom
DeFi is an umbrella term for a variety of advanced financial applications for cryptocurrencies, from loans to insurance, which flourished in 2020. Most DeFi takes place on Ethereum, the second largest blockchain, which unlike Bitcoin was designed from the ground up to perform complex calculations made possible by self-executing financial contracts. "We have positioned the funds towards decentralized finance," wrote Joey Krug, co-chief investment officer of Dan Morehead, in Pantera's letter to investors from September 2020.
"We started acquiring these kinds of assets a few years ago and it's exciting to see the DeFi space gain momentum." Centralized cryptocurrency exchanges were quick to include DeFi-associated tokens on their lists, and the total value locked in decentralized cryptocurrency exchanges rose overnight from almost nothing to over $ 13 billion in September, according to the site DeFi Pulse data.
Higher returns than hedge funds
The recovery in the four Pantera funds is remarkable considering that the same funds suffered tremendously in 2018 and 2019 when the cryptocurrency markets imploded, with the exception of the bitcoin fund in 2019.
The recovery could be due not only to Pantera Capital holding DeFi tokens close to launch in a boom period, but also to the leverage it has in maintaining large quantities, amplifying their returns.
Pantera Capital is one of the largest, if not the largest, investors in Polkadot's first token sale which raised $ 144,63 million. The Polkadot blockchain raised $ 43,3 million in a second token sale in July.
In the April 2018 data it is confirmed that Pantera Capital was also the largest investor in Origin's token sale, until the new investors took over the leadership.
Financial documents state that Pantera's cryptocurrency funds collectively manage over $ 195 million and allow investors to cash out their $ 100.000+ bitcoin investments daily and altcoin investments monthly. Including its venture funds, Pantera Capital manages approximately $ 448,3 million in assets.
