Investing has always been a risky but profitable business that requires an exceptional and careful approach in all respects. The investor is not always ready to deal with everything personally. The reason for this may be inexperience or busyness. The crypto funds are created to help investors, as well as effective capital management.
A crypto fund is a type of investment fund whose activities are aimed at operations with cryptocurrency. The work of such an organization has a legal basis, the documentation fully complies with the legislation of the country in which the fund is registered. The investor gives the fund the right to manage its capital for the purpose of making a profit. An agreement is concluded for a certain period (as a rule, at least a year) for this. Further, the fund’s employees begin to analyze the market, assess promising areas, and invest.
As in any other business, there are pitfalls here. And this article will help to recognize and protect against them. There is a commission for services for managing client funds. It is not very large, from 0.5 to 2%, but it still exists and takes part of the profit. Also, the funds provided to the fund for management are not available to the investor for the entire duration of the agreement.
API management will help to get rid of the mentioned negative aspects of crypto fund activities. This is an innovative direction, which is designed to minimize risks, increase attractiveness for potential investors.
Classification of crypto funds
There are several different types of digital asset funds. Main classification:
- venture capital;
- hedge funds or speculative.
Hedge Crypto Funds
The most popular (and profitable for their investors) are crypto hedge funds. Their essence lies in collecting funds from their investors and investing them in a specific cryptocurrency. The management of funds is carried out by invited specialists. It is very important that you should definitely pay attention to is the fees of hedge funds.
Today, according to our research, there are many hedge crypto funds, but about 150 are actively operating and developing. Ana about two-thirds of them was launched in 2018 – 2019. It was during this period that there were rapid increases in prices for bitcoin, which served as a kind of catalyst for the creation of the vast majority of such organizations.
In almost 100% of cases, a fund manager claims his strategy is completely unique, but in reality, as a rule, funds use two strategies with minor differences.
The first is stock market hedging. Most often, this refers to the combination of long and short positions in shares in the form of buying undervalued or selling overvalued shares. Most of the use of such a strategy implies a positive exposure to market risk for the fund.
The second is neutral arbitration. The strategy is practically the same as the previous one, with the exception of the desire to reduce exposure to risk by investing equal funds in both long and short positions.
The disadvantage of any crypto fund is the commission. Also, you must pay attention to the following numbers
- the average value of the management fee is 2.3% (upward trend);
- the average value of the commission for efficiency is 21.1% (a tendency to fall).
At the same time, the commission is rather a neutral necessary component, since without its presence the very existence of the fund is impossible.
The second type is portfolio funds. These include several varieties: mutual funds, ETFs, ETNs.
In the first case, the capital is formed by the aggregate assets of several investors. The share is assigned in proportion to the contribution and is expressed in the token chosen by the contributors. When a token rises in price, investors have the opportunity to sell it. The indisputable advantage of this fund is the ability to return your share at the current price, which allows you to make good money on the races.
ETF is an Exchange Traded Investment Fund. The underlying asset is one or more cryptocurrencies. The essence of such a fund is reduced to the purchase of the underlying asset and the sale of shares to investors. Investors do not directly contact the cryptocurrency, but at the same time invest their funds in it.
The third common type of crypto fund is venture capital funds, which invest in developing cryptocurrencies and highly profitable promising projects. For this category, a high degree of risk is considered acceptable, provided that an even higher profit can be obtained.
A comprehensive analysis of the investment portfolio in case of unwillingness to delve into the nuances of technologies and mechanics for a long time can be called a fairly acceptable strategy with regards to this type of fund. At the very least, this helps to neutralize the possibility of investing in garbage assets. This strategy works only if it is constantly monitored.
Regardless of the classification, there is only one unpleasant moment in relation to business – the human factor. By giving his funds into the possession of the fund, the investor still leaves the possibility of certain errors, inaccuracies associated with the inattention of a specialist. In matters of cryptocurrency, even the smallest mistake can easily cause collapse and colossal financial losses.
A significant drawback is a fairly large chance, instead of a real fund, to stumble upon swindlers. A huge number of scammers and financial pyramids calls the honest trust management of resources into question. What should a potential investor do?
API management is a type of asset management. Such a solution is intended to get rid of the above problems:
- protection against scamming – the manager can conduct transactions, but is not able to withdraw funds;
- the opportunity to provide the choice of the most profitable object for investment to artificial intelligence, which will save time and nerves;
- low qualification ceases to be an obstacle to entering the market since most of the operations are taken over by the manager and special software.
FOBS is ready to provide everything for the competent use of API in investment activities. Our rich experience in digital asset management, experienced employees, an impressive pool of working tools will provide a stable and high income.