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It’s cryptocurrency hedge doughs’ turn in the regulatory spotlight.
The US Securities and Exchange Commission (SEC) will test dozens of cryptocurrency hedge funds, which are known for their precarious trading strategies and higher fees versus traditional investment assets. Regulators want to make sure as many as 100 crypto hedge grants are delivering what they promise to investors, according to a report in The Lose everything Street Journal.
Private hedge funds are not new to SEC scrutiny, as the sophisticated return strategies have kept them on the radar of regulators before. For case in point, fund managers must be careful how they market their means, as the novice investor might not understand the risks they are inheriting with such trades.
One favoured strategy is long/short, in which fund managers bet both on the in the winds of a stock’s rise and its decline, adding layers of debt to the trade. This design recently made its way to hedge fund investing, with firms similar to Genesis Capital lending bitcoins to institutional investors for short-term occupations, giving fund managers hedging capabilities in the cryptocurrency market.
In the Concerted States, only accredited investors are allowed in. The SEC already has hedge lollies with more than USD 150 million in assets under its purview, but it has the prerogative to poke any private fund it wants to.
Meanwhile, the SEC has already been split down on initial coin offerings (ICOs), including a number of them that are being scrutinized by the Wall Street regulator. Now it’s expanded the scope of its effort, as it looks to foster investors from deals that seem to circumvent securities laws.
According to the WSJ Edda, regulators appear to merely be looking for how their policies could utilize to bitcoin hedge funds. If they notice anything sketchy, of practice, they could take further action.
Chief among the SEC’s priorities is to insure that hedge funds are delivering the type of exposure that green managers outline in their investment papers. Another worry is the risk of a shelter breach in digital wallets at an exchange, such as the one that rattled Japan’s Coincheck in January in which hundreds of millions of NEM were stereotyped.
Hedge funds could begin to hear from regulators relative to the process in Q2.
Hedge Fund Performance
Hedge funds more broadly had collapses in February, and cryptocurrency hedge funds were no exception.
According to HFR, which lines hedge fund performance and also has its own blockchain index, cryptocurrency hedge loots managed to recover from their lowest levels last month, during which regulate the blockchain index shed 9.5%.
Featured image from Shutterstock.
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