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Research • January 24, 2024 • 10 mins

2024 Institutional Crypto Hedge Fund & Venture Report

The digital asset fund landscape by the numbers..

Bailey York

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Key Takeaways

Roughly 34% of crypto-dedicated hedge funds have a 3+ year track record; 56.2% have a fund inception date between 1-3 years. Less than 7.2% of crypto hedge funds have a 4+ year track record.

The top two quartiles of crypto fundamental and quant directional funds outperformed Bitcoin in the second half of 2023.

Crypto hedge fund AUM jumped in Q4 2023 to ~$15.2b. Fundamental strategies held $11.4b, Quant Directional Funds held $1.8b, and Market Neutral Funds held $1.9b.

The median fund size grew modestly through the year for all crypto hedge funds largely attributed to cryptocurrency price appreciation, though subscriptions increased in Q4 2023.

Annually, global venture capital firms in crypto/blockchain raised $5.75b in 2023 across 58 funds, down from 2022’s record year of $37.7b across 262 funds. When comparing crypto venture firm’s share of global venture capital fundraising, crypto funds tallied roughly 3.53% of global funding down from 2022’s high of 12.62%.

Crypto-native firms tallied 72% of funds closed in 2023 as traditional investors supported fundraising for the industry. On average annually, crypto-native firms close 81% of funds dedicated to crypto venture investing.

Executive Summary & Market Context

Cryptocurrency total market capitalization ended 2022 with $840b in liquid token value. In 2023, the total market capitalization grew to $1.77t, a healthy one-year climb. Bitcoin at year-end 2022 held around 38.43% market dominance as compared to other cryptocurrencies ranked in the top ten. By year-end 2023, Bitcoin held around 47.8% market dominance. Its highest percentage of top ten liquid crypto tokens was achieved on December 6 when it comprised 51.5% as tracked by CoinGecko.

Bitcoin’s dominant run began as sentiment towards the US Bitcoin Spot ETF approval process gained momentum at the end of Q2 2023. BlackRock’s decision to file for a spot BTC ETF in June – their first such filing – reignited the horse race, leading prior issuers Invesco/Galaxy, ArkInvest, Fidelity, VanEck, WisdomTree, Bitwise and others to reapply driving a surge in market interest. Bitcoin returned to yearly highs previously reached in March 2023. By mid-summer 2023, many crypto fund managers had spent most of the early part of the year onboarding new service providers notably for banking relationships, digital asset custodians, institutional staking partners, and centralized crypto exchanges. With the implosions of 2022 still fresh on the mind of many fund managers, enhancing operational controls was a priority for firms last year. Fundraising to fund strategies had not resumed and many firms faced a market with lower volume and volatility for much of the year compared to historical standings.

Based on data from VisionTrack, we estimate that 250 of 715 crypto-dedicated hedge funds closed from May 2022 through December 2023, nearly 35% of the market. Of fund managers that didn’t lose their entire fund value to the 2022 bankruptcies, many were faced with an uncertain macro environment and the risk-appetite among allocators was reduced. While many arguments may be made to help institutions “get off zero,” the messaging for active strategies did not translate well and top hedge funds saw redemptions.

For funds that survived the 2022 downturn and redemptions in early 2023, our data suggests 34.01% of crypto-dedicated hedge funds have a 3+ year track record. 56.2% have a 1–3-year track record and less than 7.2% of crypto-dedicated hedge funds have a 4+ year track record. For an industry that grew with significant enthusiasm around fund growth in prior years, by year-end 2023, the top 20 hedge funds held roughly 71.6% of total hedge fund AUM, based on data from VisionTrack. At the end of 2022, this figure was roughly 75%. Consolidation of fund value by the top fund managers is unsurprising as many LPs will stay with a crypto-hedge fund for years at a time. While downturns are difficult and crypto hedge funds commonly have monthly subscription/redemptions, more often than not the LP base treats crypto hedge funds with a multi-year investment thesis.

For industry fund managers and their investors, a downturn such as the one witnessed in 2022, is truly confidence-shaking and sometimes existential. Constantly managing both criticism and skepticism, all positive news events are latched onto to help rebound and revive the asset class. The darkest days never appear too far removed, and a rebounding year is not always met with thrill or exuberance, rather validation and relief. The final months of the year were treated as such.

Though criticism and skepticism remain leading into 2024, crypto, most notably Bitcoin, has proved in both spirit and performance, for over a decade, to be a credible alternative to fiat currencies maintaining its store of value trade and offering a revolutionary digitally fixed-supply monetary system. In 2023, this narrative solidified, with geopolitical uncertainty and turmoil in the banking system further highlighting bitcoin’s unique value proposition.

While it’s unreasonable to predict with certainty what will happen to crypto assets in 2024, we can look to the past to prepare for a range of outcomes. What we do know is there are deep, structural issues with global monetary policy exacerbated by a high interest rate environment and pressing year-over-year inflation. For public markets, investors entered 2023 with great anticipation, though with concerns, for a soft/hard landing. The SPDR S&P 500 ETF gained +16.79% on the year, but a look behind the curtain shows much may be attributed to the magnificent seven as the S&P 500 has never in history been this top heavy. Semiconductors , the debut of practical artificial intelligence, calls for the revitalization of infrastructure and defense , and changes to global trade policy drove markets for much of the year.

Savvy investors debated the timing of the looming US recession as short-term treasuries and money market funds climbed in attractiveness month-over-month. The lush days of private market liquidity felt all but over as private equity fundraising fell to 6-year lows . Looming in the backdrop, US corporate bankruptcies climbed to 642 filings, the highest count since 2011 and investors continued to question unrealized HTM losses from top financial institutions given the illiquidity crisis of March 2023.

For much of the first half of the year, crypto fund managers faced enormous operational risks, continued regulatory uncertainty, and a difficult fundraising environment. Enthusiasm from 2021 and 2022 dissipated and it felt as if allocators and the financial media desired time away from crypto and a structural change to the adults in the room.

Hedge Funds

Performance.

In 2023, VisionTrack’s crypto hedge fund indices underperformed Bitcoin through year end. The Bloomberg Galaxy Bitcoin Index gained +153.01% and the Bloomberg Galaxy Crypto Index (BGCI) 1 [1] added +139.56% through Q4. The VisionTrack Composite Index returned +64.02%, the VisionTrack Fundamental Index gained +101.96%, the VisionTrack Quant Directional Index climbed +56.41%, and the VisionTrack Market Neutral Index reported +18.48% through December.

As indicated in our Q2 Institutional Hedge Fund and Venture report , 2023 started the year resembling 2019, with rebounded gains following a major down year. In 2019, Bitcoin outperformed compared to select ETFs and benchmarks gaining +94.37%. Over the same period, the VisionTrack Fundamental Index grew +22.4%, the VisionTrack Quant Directional Index added +38.89%, and the VisionTrack Market Neutral Index recorded +16.92%.

In 2019, Bitcoin struggled in the second half of the year with downward monthly performance in five of six months. October was the only month Bitcoin rallied (+10.19%) in H2 2019. From the end of July to the end of December that year, BTC dropped -28.83% and the VisionTrack Composite Index was down -14.92%. In the same time-frame, the VisionTrack Fundamental Index lost -24.71%, the VisionTrack Quant Directional Index dropped -10.45%, but the VisionTrack Market Neutral Index gained +1.60%.

The second half of 2023 was a much different story than the second half of 2019 for Bitcoin. In 2023, Bitcoin rallied though the Fall and early Winter beginning with impressive performance in October. Known in the industry as “ Uptober ,” Bitcoin gained +28.34% largely from ETF anticipation, compounded by a gamma squeeze rally in the Bitcoin options market. In October, reports by Bloomberg, Reuters, and others indicated genuine positive momentum in discussion between the Securities & Exchange Commission and ETF Issue-applicants. Though not guaranteed and met with suspicion, in October, Bloomberg Analysts James Seyffart and Eric Balchunas called for a 90% approval probability for US BTC Spot ETFs by January 2024 further adding to industry excitement.

Considering VisionTrack’s liquid crypto hedge fund constituent set with performance reported net of fees in USD, only ~3.9% of managers outperformed Bitcoin in 2023. In 2019, this figure was 5.9%. As indicated time and time again, the largest beta assets will outperform at the start of a cycle and allocators were prepared in 2023. In the anticipation for a year driven by Bitcoin’s dominance, US-based Asset Managers reduced allocations to crypto hedge funds. Hedge funds struggled to raise capital as they failed to beat both BTC and the BCGI month-over-month, two unofficial benchmarks for many funds. Bitcoin’s continued impressive performance through the first three quarters of the year increased competition for net new subscriptions to all active strategies in Q4. To address the challenging fundraising environment, a few actively managed fund strategies began to offer BTC-denominated share classes to attract investors in H2 2023.

Historically, BTC-denominated share classes have served primarily as a method for treasury management and assessment management solutions. The investor base is typically tailored to Bitcoin Miners, HNWIs, Family Offices, crypto companies, and foundations managing existing cryptocurrency exposure. Often justified by convenience and more familiar custodial solutions, actively managed teams offer bespoke funds for many interested investors eager to maintain or scale their Bitcoin holdings. However, in Q4 many fund managers saw these strategies as a means to compete with single-asset Bitcoin offerings, notably the highly anticipated US BTC ETFs, by targeting annual returns BTC +10-15%. According to VisionTrack, this cohort of funds returned, as denominated in BTC, +7.59% in 2023, an exciting start for the categorization, though small in its cohort.

Considering crypto fund strategies that fulfill the requirements for VisionTrack Index inclusion, in Q4 2023, the VisionTrack Fundamental Index recorded its best performing quarter of +57.85% since Q1 2021 (+186.15%) just shy of Bitcoin in Q4 2023 (+58.12%) including early reported estimates. Important to note, the fundamental index saw three-consecutive monthly double-digit gains, a first since Q1 2021 and an occurrence which has only happened twice since January 2018. Though quarterly performance almost surpassed Bitcoin’s rally, there has only been one time where the Fundamental Index had two consecutive quarters of positive outperformance to the upside, Q3 2021 and Q4 2021, a potential indicator to consider as crypto prices continue to climb in January 2024 and as the VisionTrack Fundamental Index achieves final fixings.

Quant Directional Strategies included in the VisionTrack Quant Index had their best performing quarter since Q1 2021 as well, gaining +43.75% on average to end the year, smashing through previous quarters. Several firms saw an increase in fund subscriptions through the final months of the year, suggesting liquid quant strategies may be gearing up for more fundraising in 2024.

Positive outperformance in Q4, especially November and December, was largely driven by alternative cryptocurrencies and excitement for the US BTC Spot Approval . To end the quarter and considering crypto assets with roughly $1b market capitalization or more, Solana jumped +401.9%, Sei jumped +377.1%, Injective gained +373.3%, Avalanche gained +321.1%, Near added +227.1% and Celestia debuted their liquid token gaining +301% in just two months. Quant directional and market neutral approaches were well positioned for price increases across top crypto assets as well as alternative cryptos as volume and volatility returned to liquid assets. As sentiment continued to improve and top-level narratives drove Bitcoin to yearly highs, new narratives and excitement across the market drove prices even higher, showcasing successful trading opportunities for many tested managers.

Hedge Fund Performance Quartiles

VisionTrack does not produce granular performance rankings of the crypto hedge fund constituent set. Below are performance quartiles which may inform managers and allocators to the risk and return profiles relative to VisionTrack’s fund categorizations. The categorizations below describe four segmentations replicating the underlying methodology used in the VisionTrack Indices: Composite, Fundamental, Quant Directional, and Market Neutral. Modifications to the constituent set have been made to be most inclusive of historical fund performance including select SMAs. For inclusion in the quartile analysis, funds must report net of fees and have full monthly performance detail within the given timeframe. Crypto fund strategies with incomplete performance detail on a month-over-month basis are excluded from the analysis.

Including early estimates, in 2023, Crypto Fundamental strategies averaged +85.70% through December. Quant Directional funds averaged +71.55%, and Market Neutral funds averaged 14.54%. For funds performing in the top two quartiles, hedge fund fundamental strategies and quantitative strategies were near similar in performance on the year. However, considering the second half of the year, quantitative strategies showed strong outperformance in the top quartiles. Though many funds were chasing Bitcoin for most of the year, both of the top two quartiles for Fundamental and Quant Directional categories beat Bitcoin (+38.75%) in the second half of 2023.

AUM/Fund Flows

Despite the difficulty for fund managers to outcompete passive/beta products in the first three quarters of 2023, fund managers in the top two quartiles year-over-year did see AUM growth to end 2023. While VisionTrack does not collect subscription/redemption detail at this time, we do collect monthly AUM by fund strategy. Should growth in AUM by strategy exceed the total performance reported, it’s assumed managers are seeing an increase in subscriptions.

Data collected by VisionTrack suggests crypto hedge fund sizing trended flat from February 2023 to September 2023 for many fund managers. However, from September to December crypto hedge funds grew their total AUM by +41.62% from $10.75b to $15.22b. Fundamental strategies saw the largest increase, jumping from $7.82b in total AUM to $11.46b in AUM in the same time. Quant Directional strategies ended the year with roughly $1.81b and Market Neutral funds grew to $1.97b.

Passive/beta offerings including single-asset vehicles and multi-asset index products maintain crypto fund market dominance. From month-end in September to year-end in December, all liquid fund strategies grew from $41.73b to $63.67b. At year-end passive/beta offerings held roughly 76% of institutional liquid fund value, the highest share percentage since VisionTrack’s AUM tracking began in November 2021. Of the $63.67b, roughly $32.8b was held in Grayscale’s BTC and ETH Trusts. The top ten passive/beta offerings collectively held $37.7b in total AUM at the end of December.

For fundamental funds, the median fund size grew modestly throughout the year to $34.05m, the highest value on the year, though small in comparison to early 2021. Quant directional funds recorded a sizable gain to end the year, recording a median fund size of $40.0m. Market Neutral funds achieved their highest recorded median fund size to end the year of $17.0m, a notable achievement for the cohort.

Though crypto-dedicated liquid hedge fund AUM picked up pace in Q4 2023, the top 20 liquid hedge funds still maintain roughly 71.6% of total hedge fund AUM. At year-end in 2022, this figure was 75%, a marginally positive sign to see net new funds growing the crypto hedge fund market. However, for top crypto fund managers competing with a difficult 2022 and a wave of new hedge funds from the previous cycle, fundraising for liquid strategies was met with many challenges.

Fundraising

Venture strategies often raise funds as demand for crypto reaches its height when valuations are more expensive and top cryptocurrencies perform well. As valuations cool, institutional allocation and interest declines and fundraising for crypto venture strategies becomes challenging. This was largely the case for crypto venture fundraising since Q3 2022 as passive/beta products took center stage in 2023.

Annually, global venture capital firms in crypto/blockchain raised $5.75b in 2023 across 58 funds, down from 2022’s record year of $37.7b across 262 funds. Considering the global venture capital landscape, the total amount raised from VC funds in all sectors dropped -45.51% from $298.65b in 2022 to $162.73b in 2023 with data sourced from PitchBook. When comparing crypto venture firm’s share of global venture capital fundraising, crypto funds tallied roughly 3.53% of global funding down from 2022’s high of 12.62%. Venture fundraising fell short of 2021’s share (5.65%) as well, though it improved from all prior years.

As outlined in several VisionTrack research reports over the last several quarters, venture fundraising in crypto was not a major fund vehicle until 2021. Despite dismal fundraising figures in 2023, the strategy type has made further strides since pre-2021 levels. As the market spent much of 2023 focused on passive/beta single-asset and multi-asset index offerings, crypto venture capital will likely return should crypto-native allocators aim to rotate to venture fund products later in 2024. Venture funds are critical for the development of the blockchain/crypto ecosystem as they not only provide protection to the downside through quarterly marks in private market valuations, but they also are the primary source of capital for new companies. Though historically there has only been one true downturn where crypto venture funds rose funding en masse, we anticipated that larger crypto venture firms will return in 2024 with new funds.

In Q4 2023, $689m was raised across 7 funds, the lowest level since Q3 2020. Even through Q4 2023, more capital was raised in Q2 2022 than all following quarters combined ($15.58b). The fallout of several major venture-backed startups in 2022, including those backed by some of the most prominent traditional venture firms, continues to be a contributing factor inhibiting allocator investment to the sector. When considering the investor mix of venture firms raising for the blockchain/crypto industry, crypto-native firms tallied roughly 72% of funds closed in 2023 as traditional investors supported fundraising for the industry. On average annually, crypto-native firms close 81% of funds dedicated to crypto venture investing. Traditional investors scored their largest share in 2022 when crypto natives raised only 71% of funds.

The expectation for venture funds given the cyclical rotation of allocators in the previous five years is that crypto natives and traditional investors will return to the market by mid-year 2024 with new funds. Considering the runway of crypto venture companies, this fundraising cycle will be critical for the industry. To date, few funds are mandated for later stage deals, many funds focusing attention on early-stage activity. For funds that have deployed since 2022 and through 2023, many venture-backed businesses will be further along their company lifecycle, indicating later stage rounds should be on the horizon. To best facilitate portfolio companies entering this next stage, it would be unsurprising to see later stage funds raised to support these companies.

For crypto venture capital funds, this would be a major step for the types of venture funds that are raised. Historically, it’s rare to see mandated later stage crypto venture funds raise since the blockchain/crypto market is not as robust as traditional venture. Data collected from VisionTrack finds that 90 of the 785 crypto-dedicated venture funds that raised in the previous 10 years are named Fund II, Fund III, or greater. This suggests that almost 90% of crypto-dedicated venture funds are a first-time fund for crypto exposure from crypto-native firms and traditional investors alike.

In 2023, crypto venture deal activity accounted for $9.8b in deal value across 1,998 deals according to data collected by Galaxy Research. The annual total is down from $31.9b in deal value across 3,795 deals. In Q4, dismal venture deal activity continued as 359 deals accounted for $1.92b in deal value. Considering early reported details, Q4 2023 saw the lowest deal count since Q2 2020’s 301 deals as deal counts on a quarterly basis have progressively slowed since their peak of 1,331 deals in Q1 2022. As capital in the sector is continually constrained, funds are reaching capacity on deployment and later-stage winners are capturing the remaining fund value.

In Q4 2023, later-stage venture deals captured 14.48% of deal counts and 15.83% of deal value. Historically, this is the highest percentage of later-stage deals recorded on a quarterly basis considering deals by stage. Conversely, pre-seed stage deals dropped off significantly in Q4 2023 recording just 32 of 359 total deals. Pre-seed stage deal count made up just 8.91%, the lowest level since Q1 2016. Pre-seed deals made up 15.43% of deal value in Q4 2023, below the quarterly average of 19.14% with data since Q1 2016.

As noted in our 2023 midyear report, venture capitalists were taking advantage of later-stage deal valuations and supporting prized portfolio companies. This trend did not change through the end of the year as deal activity dwindled and valuations remained flat considering all deal stages. Because the crypto venture capital fundraising market has struggled in the previous six quarters, it is unsurprising to see more consolidation to top portfolio companies. Top deals on the year included Wormhole ($225m ), Line Next ($140m ), Blockstream ($125m), LayerZero ($120m) , and Worldcoin ($115m) generally all later stage deals. Considering the top deals of 2023, only eight exceeded a value of $100m+ in deal value. No deal from 2023 recorded a record deal value in the top 50 from the previous ten years of crypto venture deals. In short, venture deal activity has not come close to reaching historic levels.

The median deal size for crypto venture deals dropped to $3m in Q4 from $3.25m in Q3. For all deals, the historical median since 2016 is $1.4m in deal value. On a positive note, the previous twelve quarters have all exceeded this median deal value. Since 2016 there have only been three quarters with a median deal size exceeding $3m in deal value, suggesting early-stage deals are more expensive despite the drop off in deal count and value. Put differently, crypto venture investors are not only increasing their minimum check size since 2016, but also becoming more strategic in their deployment year after year. Additionally, for first time in several quarters, the median deal size for all VC surpassed crypto venture, a signifier that valuations have came down for crypto companies.

In terms of valuations, median pre-money dropped to $10.8m in Q4 from $21.13m in Q3, largely attributed to less deal counts. Median post-money valuations also dropped to $14m in Q4 from $28m in Q3. The significant drop in both median pre-money and post-money valuations paired with the lack of fundraising suggests more conservative valuations for less vc-backed companies and consolidation to top-portfolio companies at lower than historical valuations. This does not attribute to a step-down for existing portfolio companies, rather, net new firms in later stages seeing lower historical valuations.

For crypto venture investors, this is a positive sign. For crypto-backed vc-companies, it’s a bit of a different picture. In general, for both crypto venture investors and vc-backed companies the industry has made progress in terms of deal sizing and valuations when considering the market prior to 2020. Despite the challenges faced for crypto venture investors, deal counts on a quarterly basis remain at or near the quarterly average since 2016 with valuations rising since 2020, a positive sign for the growing venture market.

Venture Deal Data

Accurate venture deal data for a market-wide view remains a challenge for the blockchain/crypto markets notably due to the smaller sizing in comparison to traditional venture markets. For example, through year-end 2023, for deals with a known pre-money and post-money valuation, crypto tallied 1,632 total deals utilizing PitchBook Data and Galaxy’s methodology. Considering all venture deals in traditional venture markets, this figure is 34,471. Additionally, information as it pertains to proper deal taxonomies, sectors, tokenized assets, vesting schedules, deal values, deal counts, and secondary transactions are often opaque and arbitrary datasets for crypto venture investors. This ultimately leads to discrepancies in valuations and a fragmented marketplace for venture dealers, especially on the secondary market.

When considering venture deal datasets working to improve market coverage, differences in deal value and counts are a great example of this market challenge. Galaxy’s Research’s methodology with PitchBook Data cites $9.8b across 1,998 deals in 2023. DeFiLlama ’s year-end total deal value summed to $6.2b across 720 deals. Crypto Valley’s annual blockchain venture report cites $9.8b across 1,031 deals. The Block recorded $10.7b across 1,819 deals. And Messari records $19.6b with the inclusion of Stripe’s $6.5b raise as a crypto-adjacent deal. With the exclusion of Stripe, Messari’s total deal value is $13.1b across 1,698 deals.

While a handful of venture deal datasets share resemblance in deal value and count, deal categorizations and taxonomies make assessment of the venture market difficult on an asset level. Should a fintech firm that facilitates crypto integrations with companies such as Metamask , Magic Eden , and Audius be included in venture deal activity? As more FinTech and traditional financial service firms integrate blockchain/crypto infrastructure and web3 business models, excluding these firms should be disclosed in reported figures. And, while Stripe might not be a crypto-native company with crypto-native backing, the firm is integrating infrastructure and technology to capture significant market share. That’s an important consideration for venture-backed crypto businesses.

Because there is no standardization on data collection, venture deal data may have inaccuracies. Third-party data companies, fund administrators, and valuation specialists all work diligently on this issue. However, the fragmentation calls into question the ultimate performance of crypto venture funds. Further, the lack of quality information limits the investor base inhibiting more crypto venture capital deal making. Additionally, the quality of information related to deal terms, cap tables, and time between rounds is still not as transparent in crypto venture capital as is in traditional venture capital creating challenging pipelines or paths to exit opportunities for venture-backed crypto businesses.

For a venture market in “ desperate need of an IPO comeback ”, VC exits are especially challenging for crypto-backed companies. Should crypto-venture capital funds not raise well through 2024, we either will see a continuation of dismal deal activity similar to the previous six quarters or companies will seek public markets for liquidity should they not close altogether. Should distributions pick up from recently raised venture funds, notably with 2022 vintages, this will certainly help with the fundraising cycle and be a net benefit for deal activity and valuations ending 2024. Additionally, outperformance in earlier vintages with data through 2023 will certainly help argue for more institutional allocation to venture funds. VisionTrack aims to have 2023 year-end performance of crypto venture strategies by mid-year 2024.

On-Chain Funds

For institutional crypto investors, 2023 was certainly a rebuilding year focused on restoring confidence in the market and testing new products. While not new, tokenized fund offerings and real-world assets carried investor interest through a period of low volume and volatility. Institutional staking products alongside the growth in popularity of tokenized money market funds and short-term tokenized treasuries served as a convenient operational product for investors to mitigate stablecoin risk. March of 2023’s banking illiquidity crisis drove investors to consider alternatives to stablecoins for cash-equivalent solutions bringing interested active fund managers to these financial services.

Crypto Hedge funds have tokenized investment strategies in years past, however, many challenges still face this model, and the use-case is not common. Despite many firms’ attempts to bring such a product to market, it’s anticipated that more alterative fund vehicles will come to chain the coming years. Reports from Bain at year-end 2023 suggest the tokenization of alternative investment vehicles might lead to a $400b opportunity . An exciting figure, though, we’ve yet to see this materialize with any consistency. Firms such as Superstate and Securitize are crypto-native firms working on this exact issue and are largely paving the way for investors. Of the current identifiable universe of tokenized fund products, most often funds raised are categorized as private credit. However, we are seeing more alternative funds such as KKR’s Health Care Growth II fund and commodities funds gain industry interest.

A major announcement in the development of tokenized fund products also came from Apollo and JP Morgan in Q4 2023 after several quarters of industry excitement to RWAs. The two investment giants partnered with infrastructure providers Oasis Pro and Provenance Blockchain on Project Guardian to utilize private blockchains for the management of tokenized assets and fund products. Whether the crypto hedge fund and venture industry moves in similar operational direction, we will have to wait and see.

Conclusion & Outlook

Actively managed strategies are crucial for the development of institutional crypto. Hedge funds and venture funds alike serve as a support system for the development and adoption of more widespread crypto use-cases. While performance is important, the investment vehicles provide liquidity and opportunity to an industry riddle with complications in 2022. Much of 2023 might be summarized as a challenging time for many crypto hedge funds and venture firms as passive/beta products dominated the market. As seen in previous cycles, managers focused on diligent institutional quality fund offerings often with the support of crypto-native LPs will survive and reap the benefits in rebounding markets.

From an allocator’s perspective, timing the market with a proper fund vehicle is often difficult for institutional allocators when compared to crypto-native investors as immediate market forces position an allocator in the “current trend.” Getting off zero is important and often the first step for allocators. However, the attractiveness of these fund strategies becomes much clearer in market downturns. For instance, this past summer was an excellent time to consider small and mid-cap fundamental and quant directional exposure. Should single asset spot products perform well to start 2024, it would be unsurprising to see interest and excitement build a rotation towards market-neutral and venture fund offerings later in the year.

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4th Annual Global Crypto Hedge Fund Report 2022

Key takeaways

1. Approximately one in three of “traditional” hedge funds surveyed are currently investing in digital assets, compared to one in five when we surveyed last year. The average allocation to digital assets by these funds measures 4% (a slight increase from 3% last year).  

2. By strategy, hedge funds with the most digital assets exposure include multi-strategy (32%), macro (21%), equity (18%), and systematic (12%).  

3. Of those hedge funds who are invested in digital assets, 57% have a toe-hold position with less than 1% of their total hedge fund AuM invested.  

4. Two thirds of those hedge funds (67%) who are currently investing in digital assets intend to deploy more capital into the asset class by the end of 2022.  

5. 29% of hedge fund managers who are not yet investing in digital assets confirmed that they are in late-stage planning to invest or looking to invest.  

6. Regulatory and tax uncertainty continues to be the greatest barrier to investing (cited by 83% of respondents). Of greatest concern is the globally fragmented regulatory approach/environment, followed by unclear guidance with heightened threat of rulemaking through enforcement.  

7. The lack of infrastructure/service provider availability also remains a challenge with audit and accounting now seen as the market infrastructure area being the most in need of essential improvements (94%), surpassing custody and safekeeping as the major service provider challenge to greater adoption.  

8. Around a third of respondents not currently investing say that if the main barriers were to be removed, they would actively accelerate their involvement/investment in digital assets (27%), an increase from 18% last year. While 45% of respondents stated that the removal of barriers would still probably not impact their current approach.

About the research

The Alternative Investment Management Association (AIMA) is delighted to partner once again on this industry-wide initiative to offer the very latest insights into the growing interest in the digital assets market by “traditional” hedge funds (funds that do not invest exclusively in digital assets).

The AIMA chapter offers insights into the current approach taken by these funds when assessing whether to invest in digital assets and explores the main barriers with respect to investments. Overall, the chapter offers insights into whether “traditional” hedge funds have investments in digital assets, their views on the asset class, and what they believe would be the catalysts for them to invest initially and more significantly in digital assets.

The research contained in the chapter comes from a survey that was conducted in Q1 2022 by AIMA, with 89 hedge funds that accounted for an estimated US$436 billion in Assets Under Management (AuM). 57% of the responses were from hedge funds managing assets in excess of US$1 billion.

This survey was put together with the assistance of the AIMA Digital Assets Working Group (AIMA DAWG) – a cross-section of around 300 senior industry experts including institutional investors, custodians, exchanges and other service providers. It is tasked with driving AIMA’s regulatory engagement, thought-leadership initiatives and operational guidance in the area of digital assets.

We would like to thank everyone that participated in the survey and shared their insights. If you would like to learn more about AIMA DAWG, please contact James Delaney ( [email protected] ) or Michelle Noyes ( [email protected] ).

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Crypto Investment Funds Summarized

Common types of funds:, what are crypto investment funds, crypto index funds, crypto etfs, crypto hedge funds, crypto venture capital (vc) funds, what’s next for crypto investment funds, how to navigate crypto investment funds.

Crypto investment funds can give investors exposure to digital assets without the need to directly purchase or trade them.

By Cryptopedia Staff

Updated November 9, 2023 • 4 min read

When building a portfolio, asset diversification is often central to managing risk. However, because every investor has a different risk profile, asset allocation varies across each portfolio. For example, a high-risk investor might choose to hold mostly stocks , while a low-risk investor might hold mostly bonds. Beyond specific securities, investors can diversify their investments by investing in funds that track a pre-selected basket of assets. Investment products like index funds and exchange-traded funds (ETFs) trade like stocks, while actively managed hedge funds aim to generate returns using pooled investor capital. Crypto investment funds are similar to these traditional products, but they invest mostly — or exclusively — in blockchain companies or digital assets. Most importantly, they enable indirect investment in the digital asset class, facilitating institutional participation. Alongside the growth of crypto venture capital (VC) funds, institutional investment is crucial to bridging the worlds of conventional and digital finance.

CTA: Check out more about ETFs here.

Crypto Hedge Funds : Actively managed funds that seek to generate returns by trading cryptocurrencies .

Crypto Venture Capital Funds : Invest in early-stage blockchain and crypto projects.

Crypto Index Funds : Passively track cryptocurrency indices, providing diversified exposure to the market.

Crypto Exchange-Traded Funds (ETFs) : Tradeable on stock exchanges, they hold crypto assets.

No matter what kind of asset you’re investing in, building a diversified portfolio can help protect against market volatility . If the value of one asset depreciates, the appreciation of another can help offset that loss. While many traders pursue this strategy through direct investment, others choose to gain access to a broad selection of assets through investment funds. Because investment funds usually furnish built-in diversification, investors don’t need to execute as many trades as they would if they only traded stocks. This structure can significantly lower fees and opportunity costs. In addition, fund investors don’t need to create a portfolio from scratch. Instead, they can rely on the expertise of fund managers.

Like these traditional investment funds, crypto investment funds streamline the process of participating in a new asset class. However, instead of gaining exposure to conventional assets, crypto fund investors gain exposure to digital assets without directly purchasing or trading them. This dynamic is crucial to attracting regulated institutional investors seeking more extensive portfolio management options.

With momentum building behind such institutional investment, the emergence of crypto funds is well underway. Investors now have access to crypto index funds , exchange-traded funds (ETFs) composed of crypto assets, hedge funds that focus on crypto, and venture capital (VC) funds that continue to spur new project development across the crypto industry.

In conventional markets, index funds track an established market index like the Dow Jones Industrial Average , S&P 500 , or Nasdaq Composite . If an index fund tracks the Nasdaq Composite, for example, it will contain fractional shares of every company listed on that market and track its performance. Thus, through index funds, investors can buy into a diversified market without purchasing shares of each company in that market. Crypto index funds function much in the same way, except they track specific crypto assets instead of companies. The following are examples of crypto index funds:

Bitwise 10 Index Fund (BITW): The Bitwise 10 Crypto Index Fund (BITW) is listed on OTCQX, an over-the-counter (OTC) marketplace accessible through brokerage accounts. Launched in 2017, the BITW fund tracks the Bitwise 10 Large Cap Crypto Index. As a market capitalization-weighted index, it represents approximately 80% of the total crypto market ( Bitcoin , Ethereum , Cardano , Solana , Bitcoin Cash , Chainlink , Litecoin , Polygon , Stellar , and Uniswap ).

CRYPTO10 Hedged (C10): Invictus Capital launched the CRYPTO10 Hedged Index Fund in March 2019. The smart index fund tracks 10 crypto assets; each capped at 15% of the total index value. The fund limits losses through the use of algorithmic cash hedging mechanisms — i.e., it transitions into interest-bearing cash holdings during bear markets and pivots back into crypto once a bull market returns, avoiding drawdowns.

CRYPTO20 (C20): Also from Invictus Capital, CRYPTO20 (C20) is marketed as the first tokenized crypto market index fund. The fund tracks a basket of 20 crypto assets that rebalances every week based on market capitalization. To further mitigate risk, no crypto asset can exceed 10% of the total index value. Unlike index funds that issue securities, the CRYPTO20 fund issues a native ERC-20 token called C20, representing the original investment. As a blockchain-based fund, all transactions are part of an immutable record.

Although similar, conventional index funds and exchange-traded funds have a few key differences. Unlike index funds, which trade only once a day after markets close, ETFs trade like stocks throughout the trading day. However, the most significant difference is that index funds usually track a specific market, while ETFs often consist of several assets like securities, commodities, and even real estate.

With that being said, in the realm of digital assets, these distinctions are less apparent. In general, crypto ETFs often represent investments in blockchain companies or digital assets. The following funds invest in blockchain companies:

Amplify Transformational Data Sharing ETF (BLOK)

Siren Nasdaq NexGen Economy ETF (BLCN)

First Trust Indxx Innovative Transaction & Process ETF (LEGR)

Bitwise Crypto Industry Innovators ETF (BITQ)

VanEck Vectors Digital Transformation ETF

Capital Link NextGen Protocol ETF

Global X Blockchain ETF

In comparison, the following funds invest in digital assets:

Grayscale Digital Large Cap Fund (GDLC)

Purpose Bitcoin ETF (BTCC)

Purpose Ether ETF (ETHH.TO)

Ether ETF (TSX: ETHR)

CI Galaxy Ethereum ETF (TSX: ETHX)

3 iQ CoinShares Bitcoin ETF (TSX: BTSQ)

ETFs that invest in digital assets usually track a single cryptocurrency, primarily ether (ETH) or bitcoin (BTC) — a key distinction from traditional ETFs, which are known for their diversification. Ultimately, as the crypto market matures, there will likely be opportunities to create more diverse ETFs with positions in tokenized real estate, commodities, stocks, and bonds.

Conventional hedge funds invest across diverse asset classes and market segments, and professional hedge fund managers aim to generate returns regardless of underlying market conditions. Similarly, crypto hedge funds require active management and aim to generate returns amid market volatility. To optimize returns, conventional and crypto hedge funds employ sophisticated portfolio weighting strategies and risk management techniques to protect against potential losses.

However, in contrast to conventional products, crypto hedge funds pool capital from individual and institutional investors to purchase digital assets. And as global interest in cryptocurrency has grown, so has the amount of assets under management (AUM) at crypto hedge funds. According to industry reports, the total AUM of crypto hedge funds grew to around $3.8 billion USD in 2020, up from $2 billion in 2019, and $1 billion in 2018. In addition, the percentage of hedge funds with AUM over $20 million grew from 35% to 46% in 2020. The following are examples of crypto hedge funds:

Polychain Capital: The Polychain Capital fund is one of the most significant global cryptocurrency funds, managing over $1 billion in assets since launching in 2018. Beyond investing in cryptocurrencies, Polychain also invests in early-stage startups across the blockchain and crypto industries.

Digital Currency Group: The Digital Currency Group (DCG) is a well-established crypto fund, having made over 130 investments in various projects and cryptocurrencies. Founded in 2015, DCG has provided funding to several startups like Coinbase , Bitpay, and Ripple . Its subsidiary, Grayscale, invests solely in cryptocurrencies and has amassed over $2.7 billion in AUM as of 2019.

Pantera Capital: Marketed as the first US institutional asset manager to focus exclusively on blockchain companies, Pantera Capital has invested in digital assets and blockchain companies since 2013. Through its numerous actively managed crypto funds, Pantera Capital provides investors with diverse exposure to the digital asset class. As of August 2021, investors can invest in its Blockchain Fund, Liquid Token Fund, Early Stage Token Fund, Bitcoin Fund, and Venture Fund.

Crypto venture funds make direct investments in cryptocurrency or blockchain-related companies. Although many crypto VC funds invest in early-stage startups, some adopt a multi-stage hybrid approach when selecting projects. As of August 2021, several high-profile crypto venture capital funds were investing in companies across the digital asset ecosystem. The following are examples of crypto VC funds:

Blockchain Capital: Launched in 2013, Blockchain Capital is a long-standing crypto venture capital firm. The company is credited with engineering the first tokenized crypto fund in the world, as well as the first security token. Blockchain Capital has equity in various cryptocurrency and blockchain projects and has provided financing to over 100 companies since its inception.

Gemini Frontier Fund: Gemini’s venture fund invests in early-stage crypto projects and startups.

Coinbase Ventures: The VC arm of Coinbase, known as Coinbase Ventures, invests in early-stage companies across the crypto ecosystem.

A16z: Andreessen Horowitz, or A16z, is an investment venture capital firm based in Silicon Valley with over $10 billion in AUM across multiple funds that invest in various asset classes and growth stages. The VC firm has a dedicated cryptocurrency fund with over $350 million in AUM as of 2021. Further, it has confirmed crypto VC investments in over 27 blockchain and cryptocurrency projects.

As cryptocurrency achieves more widespread adoption, investment funds are slated to serve an increasingly important role in bridging the gap between conventional and digital asset markets. Crypto funds are already encouraging more institutional investment in the digital asset class via compliant financial instruments. Further, in bypassing the need for direct digital asset ownership, crypto index funds, crypto ETFs, and crypto hedge funds can encourage market participation among individual and institutional investors alike.

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Crypto Index Fund 101: Investor’s Ultimate Handbook in 2024

• September 5, 2024 5:12 pm

Have you heard all the talk about crypto index funds? What are they, and how can you benefit from them? Or, do you want to understand how these cryptocurrency index funds are different from traditional investing methods?

Well, we are here to unravel all your queries from start to finish, so read along! 

Index funds are a great way to invest in maintaining a diversified portfolio. They’re inexpensive, and they generate good returns. It is easy to invest in them as you don’t have to research and invest in specific crypto assets. Considering all these benefits, crypto index funds are an attractive investment opportunity.

In this Investing guide, we will discover about crypto index funds and explore popular funds like Bitwise 10 Crypto Index Fund.

What Is A Crypto Index Fund?

A crypto index fund is a financial vehicle that pools funds from investors to invest in a diversified group of cryptocurrencies. It allows you to track the performance of specific cryptocurrency indexes, such as the top 10 or 20 coins, by market capitalisation. 

The index contains a pool of funds from investors who invest their money in the index fund for a diversified portfolio. Crypto index funds work on a similar concept to index funds . An index fund is a type of mutual fund, which is a pool of investor funds in which a fund manager invests in assets.

Unlike mutual funds, an index fund doesn’t have a fund manager, it invests in a specific stock market index. These stock market indexes can be the Nifty 50, S&P 500 or the Nasdaq 100. For example, the Nasdaq 100 is a market index of the 100 largest, and most actively traded companies on the Nasdaq stock exchange.

• Crypto index funds are similar to traditional stock index funds, which aim to track performance indexes like the Nifty 50, S&P 500 or the Nasdaq 100. 
• Instead of stocks, cryptocurrency index funds hold a basket of various cryptocurrencies, attempting to replicate the performance of a specific cryptocurrency index. 
• The main plus of these index funds is how they spread out your investment. Instead of betting everything on one coin, your investment is diversified. 

Types Of Crypto Index Funds

There are two main types of cryptocurrency index funds: market capitalisation-weighted and equal-weighted.

1. Market Capitalisation-Weighted Index Fund

In a market capitalisation-weighted crypto index fund, the bigger a cryptocurrency’s market value, the greater its influence on the fund. So, if a cryptocurrency has more market cap or value, it carries more weight in the overall performance of the fund. This approach aligns the fund’s success more closely with the performance of the larger cryptocurrencies like Bitcoin and Ethereum .

2. Equal-Weighted Index Fund

Equal-weighted index funds allocate every cryptocurrency equally, irrespective of their market capitalisation. This means that smaller cryptocurrencies have an equal impact on the fund’s overall performance. It’s a relatively democratic approach, ensuring that the fortunes of smaller players contribute proportionally to the fund’s success.

The choice between ‘market capitalization-weighted index funds’ and ‘equal-weighted index funds’ is a crucial decision. It determines how the crypto index fund responds to changes in individual cryptocurrency values in the crypto market.

Best Crypto Index Funds in 2024

Cryptocurrency’s gone mainstream, and so has investing in it! Crypto index funds act like baskets, holding a variety of cryptocurrencies and letting you diversify your investment. Here are the top crypto index funds in 2024 for your crypto goals.

1. Bitwise 10 Crypto Index Fund (BITW)

As the name suggests, this fund from Bitwise tracks the performance of the 10 largest cryptocurrencies by market capitalisation. The fund is market cap-weighted, meaning that larger cryptocurrencies like Bitcoin and Ethereum have a higher fund allocation.

• Ticker Symbol: BITW
• Current Price: $32.56 (as of May 18, 2024)
• Returns (NAV): 110.7% (1 Year)
• Fund Holding Cryptocurrencies: Bitcoin, Ethereum, Solana, Ripple, Cardano, Avalanche, Bitcoin Cash, Polkadot, Chainlink and Polygon

Pros Of Bitwise 10 Crypto Index Fund

• BITW invests only in the top 10 cryptocurrencies by market capitalisation, which reduces the risk.
• This crypto index fund is managed by Bitwise Asset Management, which is a popular crypto asset manager in the industry.
• The fund has a potential for high returns if the cryptocurrency market thrives.

Cons Of Bitwise 10 Crypto Index Fund

• Investors can’t control individual crypto holdings within the fund.
• The expense ratio for managed funds is 2.5%, which reduces the returns.

2. Nasdaq Crypto Index (NCI)

Nasdaq developed the Nasdaq Crypto Index in partnership with Hashdex. This crypto index fund’s primary goal is to mirror the performance of its benchmark index. The NSI fund is created to be a dynamic representative of the market that investors can track. 

• Ticker Symbol: NCI
• Current Price: $3,499.22 (as of May 18, 2024)
• Returns (NAV): 120.04% (1 Year)
• Fund Holding Cryptocurrencies: Bitcoin, Ethereum, Chainlink, Litecoin, Arbitrum, Polkadot, Uniswap and Stellar

Pros Of Nasdaq Crypto Index

• This fund measures the performance of multiple cryptocurrencies, reducing risk compared to focusing only on top coins.
• The NCI is managed in partnership with Hashdex, a well-known Brazilian asset manager. 
• The Nasdaq Crypto Index is rebalanced and reconstituted every quarter as per market conditions.

Cons Of Nasdaq Crypto Index

• The fund’s performance is linked to the performance of the included cryptocurrencies, which can be volatile.
• The cryptocurrency index fund is relatively new, it was launched in April 2021 so its long-term performance track record is limited.

3. Grayscale Digital Large Cap Fund (GDLC)

Offered by Grayscale Investments, this fund invests in a market capitalization-weighted fund of large-cap coins, including Bitcoin, Ethereum, and other major cryptocurrencies.

You can research these funds and understand the investment strategy, holdings, and fees before making an investment decision.

• Ticker Symbol: GDLC
• Current Price: $20.22 (as of May 18, 2024)
• Returns (NAV): 84.21% (1 Year)
• Fund Holding Cryptocurrencies: Bitcoin, Ethereum, Solana, Ripple and Avalanche

Pros of Grayscale Digital Large Cap Fund

• GDLC simply invests in major cryptocurrencies without the hassle of directly buying and storing individual coins.
• The Fund’s crypto holdings are stored in offline or “cold” storage with Coinbase Custody Trust.
• This cryptocurrency index fund trades on the OTC Markets like a stock, offering more familiarity and security for investors.

Cons of Grayscale Digital Large Cap Fund

• You don’t actually own any cryptocurrency, but share in a trust that holds crypto assets. These shares may trade at a premium or discount to the value of the underlying assets.
• This fund holds more than 94.21% only in Bitcoin and Ethereum. This means you may miss out on some potential benefits of altcoins.

How To Invest In Cryptocurrency Index Funds?

Don’t gamble on a single crypto! Crypto index funds offer a diversified basket of coins, like a buffet. Let’s invest smarter, not harder.

1. Research

Before investing, it’s crucial to research the various crypto index funds available in the market. Evaluate their investment strategies, holdings, fees, and historical performance.

2. Choose A Fund

Once you’ve gathered sufficient information, select the crypto index fund that best aligns with your investment goals. Also, analyse your risk tolerance and overall portfolio strategy.

3. Fund Your Account

Now, open an account with an investment platform or cryptocurrency exchange like Binance or Bitwise that offers the fund. Complete the signup process and add the desired funds you want to invest.

4. Buy Shares

Once you have added funds to your account, you can place orders to purchase shares of the crypto index fund you’ve selected. The process for buying shares may vary depending on the platform, but it generally involves specifying the number of shares or the amount you wish to invest.

5. Monitor Your Investment

After investing in a crypto index fund, it’s important to monitor its performance regularly. Any major changes to market conditions or the fund’s underlying holdings and investment strategy may impact your profitability. Many platforms provide portfolio tracking tools and regular updates to help you stay informed.

6. Track Gains And Losses

As with any investment, it’s essential to understand the tax implications of your crypto index fund holdings. Be sure to track gains or losses for tax reporting purposes. You can use KoinX to seamlessly calculate your crypto taxes. KoinX integrates with all the major crypto exchanges, blockchains, and wallets, making calculations much easier. 

Benefits of Crypto Index Funds

Investing in crypto index funds offers several advantages over holding individual cryptocurrencies. You get experts to manage your money without you being involved in actively managing a crypto portfolio. Here are some of the key benefits of crypto index funds:

1. Diversification

One of the primary benefits of cryptocurrency index funds is the diversification they provide. You can hold a basket of various cryptocurrencies and mitigate the risk associated with any single asset’s performance. This diversification can help reduce overall portfolio volatility and potentially minimise losses during market downturns.

2. Simplicity

Crypto index funds offer a simple and convenient way to gain exposure to the cryptocurrency market without having to do extensive research or purchase and manage individual digital assets. This can be particularly appealing for investors who are new to crypto investing or have limited time and resources to dedicate to actively managing a cryptocurrency portfolio .

3. Accessibility

Many crypto index funds require a low minimum investment, making it accessible for every investor. This can be beneficial for you to gain exposure to the crypto market if you have even limited capital.

4. Professional Management

Experienced professionals with years of experience manage crypto index funds. They are responsible for selecting and maintaining the fund’s holdings, as well as asset rebalancing. This can be a valuable advantage for investors who lack time or expertise.

5. Theme-Based Exposure

Like we have theme-based investment options in the stock market, you can invest in a similar function in the crypto market as well. Theme-based crypto index funds focus on specific sectors or use cases within the cryptocurrency space. This can be decentralised finance (DeFi), non-fungible tokens (NFTs), or other emerging trends like AI or RWA. These specialised funds provide exposure to the theme of the crypto market that an investor is particularly interested in.

6. Long-Term Investment Strategy

Crypto index funds are well-suited for investors with a long-term perspective. The inherent volatility of individual cryptocurrencies can be challenging for short-term traders to navigate. 

However, if you are looking to build wealth over time, the stability and profitability features of index funds make them an attractive option. This patient approach can be beneficial in the changing market conditions where long-term trends may be more meaningful to the market’s overall direction than short-term fluctuations.

Risks Associated With Crypto Index Funds

Crypto index funds provide a convenient and diversified way to invest in the cryptocurrency market, they are not without risks. Here are some of the potential risks associated with investing in crypto index funds:

1. Lack Of Control

When investing in a crypto index fund, you don’t have control over the specific assets held in the portfolio by the fund manager. This means you have limited ability to change the fund’s holdings based on your preferences.

2. Higher Fees

Compared to directly holding individual cryptocurrencies, crypto index funds typically charge management fees and other expenses. These charges are similar to those you pay for traditional stocks and mutual fund management. These fees can vary widely between different funds and can significantly impact your overall returns over the long term.

3. The Barrier To Access

Depending on your location, access to certain cryptocurrency index funds may be restricted or limited. Some funds may only be available to accredited or institutional investors, limiting their accessibility to retail investors.

4. Lack Of Knowledge

It is risky to invest in crypto index funds without fully understanding them. While these funds aim to provide diversification, some investors may not fully understand the underlying assets they are investing in.

5. Liquidity Risk

When you invest in crypto index funds, getting your money in and out quickly might be tougher than you think. This is because not all cryptocurrencies can be easily sold for cash, especially when the market is down. If too many people try to sell at once, or if the coins in the fund aren’t popular, you could be stuck waiting. 

6.Regulation And Compliance

The regulatory landscape surrounding cryptocurrencies and crypto-related investment products is still evolving and subject to change. Changes in regulations or compliance requirements could impact the operations or viability of certain crypto index funds. For example, an increased tax or a ban on investing platforms in a particular region could impact these funds. 

You need to evaluate the risks associated with any crypto index fund. Before investing, ensure that the potential rewards align with your investment objectives and risk tolerance.

Investing in a crypto index fund offers a simple way to diversify your cryptocurrency portfolio and mitigate risk. These crypto index funds will see more growth in the bull market as more investors become interested in the cryptocurrency space. However, it is equally important to understand the risks associated with crypto index funds. When picking a crypto index fund, consider factors such as the fund’s strategy, fees, and past performance. 

Additionally, crypto investing attracts taxes in different countries. And manually calculating many transactions can be very daunting and time-consuming. 

Hence, you can use KoinX , an automated crypto tax tax-calculating software that segregates transactions based on their nature and calculates the crypto taxes. KoinX also provides features like portfolio tracking and management. You can effortlessly track your holdings across different chains and exchanges while tracking current debts, and gains. So, sign up today and get your crypto tax sorted.

Frequently Asked Questions

Are crypto index funds good for investment.

Crypto index funds can be a good investment option if you are seeking diversified exposure to the cryptocurrency market. Similar to traditional index funds, cryptocurrency index funds are long-term investments. They provide a convenient way to invest in a basket of digital assets, which is profitable in the long term.

Can I Create My Own Crypto Index Fund?

Yes, you can create your own “DIY” crypto index fund on Binance. On the Binance menu, select Index-Linked and choose the Create a Plan option. Now, choose the coins you want in your index fund. After that, add your investment amount,  recurring cycle and confirm the order. However, creating your own index fund involves tasks like researching and selecting cryptocurrencies, determining allocations, and periodically rebalancing the portfolio to maintain your desired asset allocation.

What Is The Minimum Investment For A Crypto Index Fund?

The minimum investment required for crypto index funds can vary across different providers and fund offerings. Some crypto index funds may have low minimum investment requirements, such as $100 or $1,000. Other funds targeting institutional investors may have higher minimum investment thresholds, such as $20,000 or $100,000. 

Can You Buy The Bitcoin Index?

Presently, there is no single “Bitcoin Index” that you can directly invest in. However, there are crypto index funds that include Bitcoin as a significant component of their portfolio. For example, the Bitwise 10 Crypto Index Fund and the Grayscale Digital Large Cap Fund both hold Bitcoin as one of their largest holdings. The Binance CMC cryptocurrency Top Equal-Weighted Index has 10% exposure to Bitcoin and 90% in other leading cryptocurrencies.

How Do I Buy Crypto indexes?

To invest in crypto index funds, you can open an account with a cryptocurrency exchange or investment platform. Choose the type of fund you want to invest in, like funds that focus on Bitcoin or funds that have equal weightage for the top 10 cryptocurrencies. Choose your investment amount and frequency, such as daily, weekly or monthly. Now complete the payment and you are done.

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Today's Cryptocurrency Prices by Market Cap

The global crypto market cap is $2.11T , a 3.32 % increase over the last day.

The total crypto market volume over the last 24 hours is $66.17B , which makes a 1.97 % increase. The total volume in DeFi is currently $3.98B , 6.02% of the total crypto market 24-hour volume. The volume of all stable coins is now $60.9B , which is 92.04% of the total crypto market 24-hour volume.

Bitcoin’s dominance is currently 56.61% , an increase of 0.46 % over the day.

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The very first cryptocurrency was Bitcoin . Since it is open source, it is possible for other people to use the majority of the code, make a few changes and then launch their own separate currency. Many people have done exactly this. Some of these coins are very similar to Bitcoin, with just one or two amended features (such as Litecoin ), while others are very different, with varying models of security, issuance and governance. However, they all share the same moniker — every coin issued after Bitcoin is considered to be an altcoin.

What Is a Smart Contract?

The first chain to launch smart contracts was Ethereum . A smart contract enables multiple scripts to engage with each other using clearly defined rules, to execute on tasks which can become a coded form of a contract. They have revolutionized the digital asset space because they have enabled decentralized exchanges, decentralized finance, ICOs, IDOs and much more. A huge proportion of the value created and stored in cryptocurrency is enabled by smart contracts.

What Is a Stablecoin?

Price volatility has long been one of the features of the cryptocurrency market. When asset prices move quickly in either direction and the market itself is relatively thin, it can sometimes be difficult to conduct transactions as might be needed. To overcome this problem, a new type of cryptocurrency tied in value to existing currencies — ranging from the U.S. dollar, other fiats or even other cryptocurrencies — arose. These new cryptocurrency are known as stablecoins , and they can be used for a multitude of purposes due to their stability.

What Is an NFT?

NFTs are multi-use images that are stored on a blockchain. They can be used as art, a way to share QR codes, ticketing and many more things. The first breakout use was for art, with projects like CryptoPunks and Bored Ape Yacht Club gaining large followings. We also list all of the top NFT collections available, including the related NFT coins and tokens.. We collect latest sale and transaction data, plus upcoming NFT collection launches onchain. NFTs are a new and innovative part of the crypto ecosystem that have the potential to change and update many business models for the Web 3 world.

What Are In-game Tokens?

Play-to-earn (P2E) games, also known as GameFi , has emerged as an extremely popular category in the crypto space. It combines non-fungible tokens (NFT), in-game crypto tokens, decentralized finance (DeFi) elements and sometimes even metaverse applications. Players have an opportunity to generate revenue by giving their time (and sometimes capital) and playing these games.

One of the biggest winners is Axie Infinity — a Pokémon-inspired game where players collect Axies (NFTs of digital pets), breed and battle them against other players to earn Smooth Love Potion (SLP) — the in-game reward token. This game was extremely popular in developing countries like The Philippines, due to the level of income they could earn. Players in the Philippines can check the price of SLP to PHP today directly on CoinMarketCap.

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Prior to joining Messari, Chris was the Growth Lead at a Paradigm and a16z-backed gaming startup called LootRush. His primary focus is Consumer Products, Music x Crypto, Gaming, Digital Art, and market buying local tops.

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About the author

Information diffusion in referral networks: an empirical investigation of the crypto asset landscape

• Open access
• Published: 11 September 2024

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• Srinidhi Vasudevan   ORCID: orcid.org/0000-0002-8584-9112 1 ,
• Anna Piazza 1 &
• Stefano Ghinoi 1 , 2 , 3 , 4  

In the last decades, crypto assets have become particularly popular in financial markets. However, public awareness of the crypto asset landscape is rather limited, and usually associated with sensationalized media coverage of a handful of cryptocurrencies. Moreover, while users of crypto assets primarily collect information on Internet, there is a limited understanding of the relational (online) structures supporting the diffusion of information about these financial products. Therefore, the aim of this study is to uncover the structure of online information referral networks dedicated to crypto assets. By adopting a multi-method approach consisting of web scraping, web analytics, and social network analysis, we use data from the top 200 crypto assets by market capitalization to identify pivotal websites and the overall connectedness of the information referral networks. Our results show that social media and news channel sites play a key role in the information diffusion process, while market and trading sites signal innovation adoption. Overall, cryptocurrencies’ websites do not seem key in the referral network, as opposed to social media websites which, however, cannot be considered mature hubs because of their low connectivity.

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1 Introduction

Over the last 2 decades, a new phenomenon has revolutionized financial markets: the introduction of digital currencies adopting blockchain technology (Griffin and Sharms 2020 ; Nakamoto 2008 ). Blockchains provide an immutable system which forms the backbone of crypto assets: transactions cannot be deleted or altered, and this enables transaction histories to be stored and transmitted globally through peer-to-peer computers (Koroma et al. 2022 ). However, public understanding of crypto assets, and the full scope of the crypto asset landscape, remains nascent at best or ill-informed at worst. Recent studies have shown that this limited understanding is linked to sensationalized media coverage of a handful of cryptocurrencies during events of high crypto-market volatility (Olney 2022 ). Researchers looked at specific groups and interactions in the community of media-sensationalized currencies such as Bitcoin (Hedman et al. 2021 ) or Ethereum (Bizzi and Labban 2019 ) to test public engagement, finding that cryptocurrencies’ performance is strongly influenced by the media narrative, which tend to be rather sensationalistic and not always objective. Despite the growth of cryptocurrencies’ market capitalization—which reached over 3 trillion USD in 2022 (Forbes 2022 )—the main information sources leading to such upsurge of crypto assets remains unclear (Antonakakis et al. 2019 ).

In contrast to other financial assets, the decentralized nature of crypto assets results in lack of formal control; this leads to self-regulating behaviors where social interactions determine the dynamics of the crypto assets landscape (Chiu 2021 ). This is why recent studies have started to look at the crypto asset landscape as a socio-technical ecosystem, emphasizing that individuals do not act in isolation, but they interact with technologies to the extent that they influence each other (e.g. Shin and Rice 2022 ). Online websites become key in the spread of information, and in the crypto asset landscape they become particularly relevant since users’ activities are mediated by IT tools. This online space can offer novel insights about the influence process related to innovation; however, existing research so far has not investigated in depth the (online) relational aspect characterizing the crypto asset landscape.

We assume that individuals are embedded in complex relational patterns, and they rely on information shared via networks of social interactions (Yi et al. 2020 ). This idea is the central feature of the innovation diffusion network perspective, where innovation is spread through the social networks of those who are perceived as the most influential and trustworthy sources of information (Valente 2012 ; Valente and Rogers 1995 ). However, research also shows that innovation diffusion may vary according to the context (Arieli et al. 2020 ) and social awareness (Müller and Peres 2019 ), which may lead to social behaviors that are not linear by nature but depend on the network features of the social system. This paper goes beyond the literature that looks at crypto assets as socio-economic artifacts (Li et al. 2019 ; Shin and Rice 2022 ), their geographic dispersion (Park and Park 2020 ), and their financial determinants (Feyen et al. 2022 ), and aims to investigate the importance of online interactions in supporting awareness of crypto assets and their diffusion. By using a multi-method approach based on web scraping, web analytics, and social network analysis (SNA), we identify and map a referral network whereby hyperlink referrals are seen as footprints of user behavior. As such, we describe how networks support the adoption of innovation propagated across web hyperlinks. As a result, we identify the most influential websites in disseminating information within the referral network and uncover their connection patterns. Specifically, we describe the impact of the information referral networks as channels for spreading the diffusion process by analyzing the most central or pivotal websites in the network and showcase how popular websites drive the herd behavior in adoption of crypto assets. The primary research question that this study seeks to address is the following: how does network position in the information referral network is affected by, and affects, (crypto asset) information diffusion? In this vein, we seek to unveil the role of (online) relationships and understanding their influence on the crypto asset landscape.

The paper is organized as follows. First, we review the technical features of crypto assets, and we introduce the relational perspective used for understanding innovation diffusion. Second, we describe the data collection process and the method of analysis. Third, we present the results of our analysis, focusing on the key nodes (i.e. websites) that are supporting the spread of information related to crypto assets. Finally, we discuss the practical implications of our analysis—how crypto asset developers should use central websites to reach a broader audience.

2 Theoretical framework

2.1 understanding crypto assets.

Crypto assets are digital assets that use digitalization technologies such as Public Key Infrastructure (PKI), cryptographic techniques, and Distributed Ledger Technology (DLT)—which rely on the blockchain technology. While initially designed with the purpose of transaction storage, it has since been used for implementing several decentralized applications like asset tracking (Rosenfeld 2012 ), smart contracts (Drummer and Neumann 2020 ; Mohanta et al. 2018 ), and distributed databases (McConaghy et al. 2016 ), to name a few. While there is currently no standard taxonomy provided for crypto assets, there are international standards in place for blockchains and DLT created by the International Organization for Standardization (ISO). Footnote 1 Crypto assets can be classified into 3 main categories. The first includes payment or exchange tokens commonly referred to as cryptocurrencies: peer-to-peer (P2P) alternatives to legal tender issued by governments based on PKI and cryptographic mechanisms, which are used as a general medium of exchange with the ability to convert it to a legal tender (Hays and Kirilenko 2019 ). The second category is decentralized finance (DeFi), which relies on the use of smart contracts—self-executing agreements between a seller and a buyer stored in a decentralized and distributed blockchain network (Bartoletti and Pompianu 2017 ). The third category of assets are Non-Fungible Tokens (NFTs) and Collectibles commonly referred to as Play to Earn (PTE) tokens. In the cryptocurrency markets, ubiquitous speculation exists with games that are offered in the blockchain environment (Gandal et al. 2018 ); PTEs are part of collective initiatives and are provided in the form of puzzles, avatars, or NFTs that can be used in the game.

2.2 The social aspect of the crypto landscape: from a socio-technical to a relational ecosystem

A major line of contemporary blockchain research describes the crypto asset landscape as a socio-technical ecosystem that encourages interactions among participants (Park and Park 2020 ). Here, the socio-technical component of the crypto landscape underlines the link between social factors and technological factors in understanding the ecosystem (Gandal et al. 2018 ): social factors are strictly related to individuals’ behavior and attitude, while technological factors are associated with the characteristics of technology (Bostrom and Heinen 1977 ). Individuals and technologies interact to the extent that individuals use and apply technologies. As such, a crypto asset “is seen as a network with a socio-technical structure since the systems are composed of technical infrastructure and the social relations between users of the crypto ecosystem” (Park and Park 2020 ). A relational framework therefore explains the interaction between social and technological factors as it highlights the importance of interactions among participants: participants are embedded in a network of social relationships through which tangible and intangible resources are exchanged. If the socio-technical framework characterizes crypto assets and their link to legal and ethical aspects (Dowling 2022 ), the relational framework can be identified by both structures (in terms of social relations) and processes (or mechanisms, which generate these structures). As such, adopting crypto assets into the social structure is the result of interactions among key players (such as users, group of users, community of practices, stakeholders and market) who are social innovators to the extent they impact and change these social interactions. Thus, the social agency is not only an attribute of participants, but also an attribute to the system and distributed across the network of relations within the crypto landscape. Adopting crypto assets is therefore established through the joint actions of multipoint contacts within this ecosystem. Specifically, interactions between innovators provide the relational infrastructure to support a range of social processes, including the adoption and diffusion of innovation (Sousa et al. 2022 ). These social processes represent the actual mechanisms through which the adoption of crypto assets operate among individuals. For this reason, the relational nature of the crypto asset ecosystem may be explained with innovation diffusion theories.

2.3 Innovation diffusion and networking

Innovation diffusion theories not only explain the velocity of innovation adoption, but also why some innovations become de facto widely adopted while others might not take off at all. According to Rogers ( 2003 ), diffusion is “the process by which an innovation is communicated through certain channels over time among the members of a social system”; the importance of individuals in this process is evident, but at the same time the vehicle of diffusion and the presence of a structured social systems are key for the success of an innovation’s diffusion.

Individuals’ behavior in the adoption of innovation can be influenced by a variety of psychological and environmental factors, and usually it follows five different stages: knowledge, persuasion, decision, implementation, and confirmation of the innovation adopted (Rogers 2003 ). Moreover, adoption decisions can stem from the indirect influence of those who adopted the innovation in the first place (Chao et al. 2020 ). Social pressures lead to further adoption of the innovation as individuals prefer to conform to social norms, which further reinforce the bandwagon effect (Abrahamson and Bartner 1990 ).

This effect is usually strengthened by a communication channel that can reduce the amount of time necessary for exchanging information between individuals (Vishwanath and Barnett 2011 ). Internet is probably the most powerful tool for knowledge and information exchange that has been created in decades, and digital networks have become fundamental in spreading new ideas and innovation (Sproull and Kiesler 1991 ). Especially when considering novel technologies, internet and IT infrastructures foster the commitment of individuals to social norms and therefore explain the rapid adoption of certain technologies (Sawang et al. 2014 ).

Nevertheless, without a social system where innovation can be spread this process would be unsuccessful. Ashley ( 2009 ) pointed out that it is within social systems that innovation can be spread, and individuals and their relations—as well as organizations and institutions—determine who can be reached by the new information about it. Diffusion processes within social systems can be investigated by adopting the research lens of network theory and using relational approach for empirically evaluating network-related phenomenon. Depending on their structuring, networks can facilitate the access to novel information: relations are created between network actors via physical or online interactions, and the positioning of these actors in the network impact the diffusion process (Burt 1992 ). A study from Ma et al. ( 2014 ) shows that actors’ behavior to share news is influenced by the strength of their relationships. Similarly, Zhang and Peng ( 2015 ) show centrality of individuals in advertising systems are key in the diffusion process. In this vein, referral networks are extremely important in shaping and driving users’ behavior, because it has been demonstrated that individuals make their choices (about a new product and/or innovative system) according to their reference group (Cho et al. 2012 )—individuals accessing the same web pages and websites referring to the same set of information from the same group of websites. Therefore, we argue that relational approach can be used for understanding the crypto assets’ diffusion process.

3 Research method

3.1 data collection.

We collected and triangulated 3 different sets of data to examine the network position that websites come to occupy within the referral network. Specifically, we used a 3-steps approach to scrape crypto assets data. First, we relied on the coinmarketcap API to obtain the top 200 assets by market capitalization. Footnote 2 Coinmarketcap also provides a classification of the assets (Defi, NFT, PTE, currency). For each of the assets, the API provides the official website, the total market capitalization, circulating supply, trading volume as well as the maximum supply if applicable (Coinmarketcap 2021 ). Following prior research on cryptocurrencies (Drobetz et al. 2019 ; van Tonder et al. 2019 ), we use a Web scraping approach from the Coinmarketcap website. This approach was adopted as the API of Coinmarketcap allows us to automate the process of extracting data about the crypto assets such as cryptocurrency name, price, circulating supply, official website of the currency and market capitalization and storing this data in a structured manner as a CSV file (Coinmarketcap 2021 ).

Some assets have more than one official website listed, in which case all the sites are taken into consideration for the analysis. Second, we used the API from SimilarWeb to scrape web analytics data for the websites of the top 200 crypto assets (by market capitalization) obtained from coinbase and coinmarketcap in September—November 2021. This approach of data triangulation has been holistic, however, there was no analytic data available for 54 websites which resulted in a total of 173 websites. This is not a limitation per se as there were multiple websites for some crypto assets and all categories of the assets have been represented in the sample obtained. Also, this period has been chosen as it is characterized by volatility in the market. Furthermore, there were several major events and developments since the mid of the year. First, on the 7th of September, due to deleveraging, over $320 million leveraged Bitcoin was liquidated leading to a 11% market-wipe out of the Total Value Locked (TVL). Second the Chinese Government announced that all cryptocurrencies were illegal. Third, El Paso accepted crypto currency as the legal tender. Finally, several Tweets of Elon Musk led to fluctuations in the market. For instance, one of his tweets caused a 4% drop in bitcoin prices, pushing it below its 20-day moving average at $33,710 in June 2021; driving down Tesla’s (NASDAQ: TSLA) stock quote by a third and Bitcoin (BTC) by more than 40% below its April peak at $64,895.22 (Yahoo News 2021 ). On the other hand, Dogecoin (rolled out as a joke with little stock value Source in NYTimes, 2021), had a multibillion-dollar valuation (DOGE value as at July 2021: 26.244B), mostly as a result of another tweet from him. Indeed, Nick Spanos, the co-founder of ZAP protocol mentioned that “when Elon Musk tweets any crypto-related content, the market … expects a reaction” (Yahoo News 2021 ).

SimilarWeb provides a comprehensive list of engagement metrics for a website including unique users who visited a page, countries where the page has been accessed from, bounce rates, time spent on the site, the sites which have led users to the site in question, and the sites that the current website redirects the users to. User-centric data is collected from a global user panel of 400 million users, website analytics and ISP data to obtain website traffic information. To set up the web mining tool, first, an API key was obtained. Once this was done, there was a 3-step process followed to obtain the necessary information about the websites. First, the end points were constructed by creating a batch API request. Second, this request was sent as an HTTP POST request as a batch. This was particularly useful considering that we could obtain batch jobs and all data from the request can be obtained in one-go as opposed to creating individual requests. Using the website’s data allowed us to obtain information pertaining to both traffic and engagement—including global rank, country rank, bounce rate. Next, the referral traffic data was used to obtain information about visitors who visited a website through clicking links from other pages. Finally, the API response was received in JSON format.

Third, we obtained the network data on the referral sites. For every crypto asset, we looked at the top five sites that refer the user to the website of the assets, and also the top five websites visited by the users of the crypto websites. The information referral network includes sites and referred sites that have been created by using SimilarWeb. An adjacency matrix (A) for the directed network is created such that the rows and columns correspond to a website. The value at position (A_{ij}) is 1 if there is a directed tie from website (i) to website (j), and 0 otherwise. The rows in the matrix represent the outgoing ties and the columns represent the incoming ties. The network comprises 2273 nodes (websites) with 2101 ties representing the information referral process.

3.2 Analysis

To investigate the level of diffusion and the most central websites, we employed a combination of web analytics and SNA. Web analytics helps to understand which are the topical trends, how website users behave, the interests of the users and the most popular sites/pages (Jansen 2009 ). Studies using web analytics concentrate on individuals, websites, and the networks created by online interactions to estimate traffic to websites; interactions are mapped via hyperlinks, which enable individuals to make contacts with “people or groups anywhere in the world” (Park 2003 , p. 50). We accounted for 3 different metrics namely web global ranks (calculated using the total unique pageviews and visitors), total visits and average time spent per unique user (SimilarWeb 2021 ).

Since we can see hyperlinks as connections, it is possible to assume that the hyperlink structure is a communication network among actors operating online (Park 2003 ). Hence, SNA is then applied for assessing how the diffusion of crypto assets spreads across information channels. SNA is a discipline which focuses on the investigation of social structures by using analytical methods derived from graph theory (Wasserman and Faust 1994 ); social structures—or social networks—can be found in both physical and digital environments, where networks can be mapped if we have nodes (individuals, organizations, institutions, or other identifiable actors) connected together via a set of relationships. Relationships can be directed or undirected—if there is a flow from one node to the other—and weighted or unweighted—if the relationship has a value, such as a monetary value, or not (Prell 2012 ). The World Wide Web (WWW) is seen as a medium where information about innovation and innovation itself are connected to individuals; hence, SNA can be used for exploring patterns between individuals and web pages emerging from hyperlinks (Barnett and Park 2014 ; Can and Alatas 2019 ) and ‘understanding the interplay between computer-mediated social processes’ (Park 2003 , p. 50). As highlighted before, networks are made by nodes connected via ties/relationships (Wasserman and Faust 1994 ): in our context, nodes are the web pages, which are connected by the referral relationship; the referral process is based on the idea that when a user leaves a website to go to another a relationship between nodes (websites) is created. The users’ behavioral intention can be captured as they knowingly click on hyperlinks that are created by the site editor to move to other pages within the same or different site. This shapes the social structure which results in the formation of the network, as the web does not have an engineered architecture (Rosen et al. 2011 ). Hyperlink network analysis has become an important research area in SNA, since the seminal works of Park ( 2003 ) and Park and Thelwall ( 2003 ); in the last 20 years, scholars have used this methodological approach to investigate digital network structures in tourism and hospitality (Ying et al. 2016 ), politics (Elgin 2015 ; Lusher and Ackland 2010 ), and manufacturing (Hyun Kim 2012 ), using quantitative methods and statistics from SNA.

In order to assess the diffusion of innovation in our information referral network, we estimated a set of network statistics, similar to what has been done in previous studies on online networks (e.g. Barnett and Park 2005 ). We concentrate on one network-level measure called degree assortativity, and 3 node-level measures, namely in-degree, out-degree, and betweenness centrality. Degree assortativity is the Pearson correlation of the degree of single nodes in the network, and it shows the extent to which nodes with similar degrees are connected to each other; when its value is high, it means that nodes with higher degrees will be connected to each other (Newman 2002 ). This is captured by measuring for each node i in the network with j neighbours the average degree of its neighbors ( \({k}_{\eta n}\left({k}_{i}\right)\) , and is given by the formula:

Once the average degree is measured, the conditional probability (Eq.  2 ) P(k′|k) is used for quantifying the degree correlations (Pearson correlation coefficient given by r—Eq.  3 ) inspecting the dependence of knn(k)- which denotes the average degree of degree-k nodes on k. Thus,

Centrality measures allow us to explore users’ capability to spread information according with the positions that they come to occupy within the network (Wasserman and Faust 1994 ). Specifically, in-degree centrality accounts for the ability of a website to be an influencer based on its number of connections. To calculate the in-degree of a node i , the i th row is summed and is given by the formula:

Influential websites may be seen as opinion leaders since these sites can shape users’ behaviors and decisions. When websites funnel connections to other sites, they basically spread information in the network by connecting to other sites. This networking behavior is captured by the out-degree centrality which is an estimate of the number of connections from one node to others (Wasserman and Faust 1994 ). To calculate the out-degree of a node i , the i th column is summed and is given by the formula:

Finally, websites may play a role of information bridge by connecting different sites within the network. This is captured by the betweenness centrality which accounts for the number of times that one node is in the shortest path between other nodes in the network (Rosen et al. 2011 ) denoted by the formula:

Hubs characterized by nodes with high betweenness centrality are vital for disseminating information in the network, and their presence usually leads to a higher diffusion rate [46] given by the formula:

where L refers to the total number of links.

For the top 200 crypto assets based on market capitalization, a total of 227 websites were identified; no analytic data was available for 54 websites, which resulted in the analysis of 173 crypto assets. Table 1 provides some descriptive statistics. Footnote 3

The top 10 crypto assets based on Web Global Rank, average time visit, and total visits—as listed in coinmarketcap by using data from the web scraping process—are provided in Table  2 .

We look at measures of engagement and user attention by analyzing the Web Global Rank, average visit time and total visits, since these metrics are considered the most important indicators for user activity (SimilarWeb 2021 ). Currency websites such as Binance Coin and Waves have a higher global rank followed by Axie Infinity, which is a PTE. This shows that traffic (determined by unique views globally) to these websites are higher compared the much-sensationalized cryptocurrencies such as Bitcoin or Ethereum. The top asset types by average visits are PTE, and with the exception of Binance Coin and Bitcoin Cash most of the currencies have a lower average visit duration next to NFTs. While it is possible to argue that higher average visit could also be associated with complex sites, Myers et al. ( 2008 ) have shown that when web interfaces are complex, this leads to individuals bouncing off. Similarly, there are no NFTs in the top-10 by total visits, while DeFi tokens overall have higher total visits than other crypto asset types—even if the top website per total visits refers to TerraUSD, a cryptocurrency.

Figure  1 illustrates the information diffusion process across websites, i.e.; how users obtain information and where they are bounced off—after viewing one page—when they leave a website. The dots represent the websites. The size of each dot is proportional to the number of websites receiving connections (the “indegree” of the information referral networks). Coinmarketcap; GitHub; Medium; Coinbase; and Coingecko are the most popular websites, i.e., they are influential as they shape users’ behaviors. The lines represent the referral process.

Information Referral network. The dots represent the website, and the lines represent the referral process —when a user leaves a website to go to another. The size of the node is proportional to the number of incoming connections

The network density (proportion of the total network ties over the total number of possible ties) is 0.001 and the average degree (average number of connections a node has in a network) is 0.927; both these statistics are particularly low, which indicate an environment characterized by lower diffusion of information and therefore innovation (Myers et al. 2008 ). While too much density can be an issue in terms of innovation diffusion, because of the risk of redundancy and tendency towards imitation, it is also true that a moderate level of density is needed to increase the likelihood of being exposed to novel ideas (Shaw-Ching Liu et al. 2005 ). Similarly, a low level of average degree centrality indicates that we are observing a network characterized by several peripheral actors: this is not favoring innovation diffusion, since peripheral actors are not able to influence other nodes and spread innovative ideas.

The score for degree assortativity is 0.019, which is considered almost null (i.e. there is almost no relationship between nodes with similar degrees); this may indicate that there is no redundancy in the network. If we look at the node-level, we see that certain websites are more prone to attract users and send them to the market sites. Social media websites (such as YouTube, Twitter (now X), LinkedIn, and GitHub—which can be considered a social media platform for developers) and informational sites (etherscan.io, which is a blockchain explorer for Ethereum network, or medium.com, which is a publishing platform) can thus be good information sources to observe users’ actions before making choices about adopting crypto assets (Tandon et al. 2021 ). From our analysis, we see that users move from sites social media websites to crypto assets’ website, and from there they reach the market sites as indicated by the scores for out-degree centrality in Table  3 . Websites with higher in-degree centrality act as the initiators of the diffusion process, while websites with higher out-degree centrality enable individuals to conform to (online) social norms via the adoption of crypto assets—because these are the market sites where individuals can purchase assets. Finally, nodes with high betweenness centrality are seen as those influencing the flow of information in the network as they act as bridges to connect to the official websites of the crypto asset.

5 Discussion

Our analysis provides novel insights on the crypto asset landscape, and the diffusion process of information related to crypto assets. Two main findings emerge from this research: first, websites of the much-sensationalized cryptocurrencies are not key in information diffusion; second, social media websites are seen as enablers of the diffusion process—but they actually cannot be considered mature hubs for supporting this process because of their low connectivity.

Regarding our first finding, this may be perceived quite surprising. However, it is also true that market-related information about crypto assets is often conveyed by other media—especially news media specialized in finance such as CNBC and Forbes. Major events related to crypto assets have a positive or negative impact on their returns (Hashemi Joo et al. 2020 ), and the larger the media coverage the higher the impact—which is something that a single website cannot do. Official websites like Bitcoin.com can promote or recommend specific financial products, such as open-source wallets, but previous studies found that professional investors sometimes prefer to collect first-hand information via Twitter (now X) (Shen et al. 2019 ). In this vein, our study complements the analysis of Park and Park ( 2020 ), which focused on the websites of top 50 cryptocurrencies and found that, among these websites, those related to the much-sensationalized cryptocurrencies (by the news channels between September and November 2021) are central in the network. However, since they did not concentrate on other crypto assets or media websites, we argue that websites of popular cryptocurrencies are key only when considering this specific asset—the cryptocurrency. Eryiğit and Eryiğit ( 2021 ) pointed out that social media play a relevant role in the diffusion process; their work specifically focused on Bitcoin, but their findings support the idea that word of mouth is particularly effective—and social media strengthen this process. As highlighted by Yang et al. ( 2019 ), self-media users are important sources of diffusion. Compared to official media users, those users creating their own contents on platforms such as Weibo—the microblogging platform examined by these scholars—are more effective in spreading information and ideas compared to those who refer to traditional media or official sources of information. Our results are aligned with this finding: social media platforms are powerful tools for information diffusion, and within these platforms unofficial content creators (e.g. YouTubers) are capable of reaching a larger audience as opposed to official sources (e.g. Bitcoin.com).

The above discussion relates to our second finding: social media websites play a relevant role in the diffusion process. This confirms what has been reported by Moser and Brauneis ( 2023 ): there is a world of professional (but also non-professional) financial advisors that are sharing contents using social media such as YouTube or Twitter (now X), and their channels are rather popular among investors. This finding needs to be interpreted in light of the relational approach we used for understanding innovation diffusion. Interactions between different players can be detected all around the globe: the World Wide Web enables individuals with different expertise to share information via different channels and potentially reaching everyone in the world –with an Internet connection. In a way, the diffusion of crypto assets is supported by the presence of social innovators who communicate using different social media channels. van der Linden and van Beers ( 2017 ) found that some social innovators tend to promote crypto assets in their geographical environment, because of personal interests; however, crypto assets are global by definition, and therefore we also have social innovators who aim to be disruptive—in their approach to innovation—and influence as many individuals as possible globally. Hence, the adoption of this particular type of innovation follows social processes that have been observed also in other contexts. However, we discovered that social media websites are not providing the boost that is needed for initializing a robust diffusion process. Low levels of degree assortativity and connectivity in networks indicate potential issues in knowledge diffusion. As highlighted by Müller and Peres ( 2019 ), high assortativity is important because relevant actors/nodes in the networks can be strongly interconnected and reaching them can effectively boost the diffusion process. If such actors are missing in the network, this may hinder the diffusion process. Low assortativity per se is not a structural problem, from a network perspective, but there should be at least a set of nodes with high betweenness centrality—i.e. nodes that act as brokers in the network and support interconnectivity—in order to facilitate knowledge diffusion. In general, technological networks are considered to be disassortative and particularly sensitive to disruptions such as the removal of key nodes (Newman 2002 ); in this context, it is confirmed that the overall referral network is not dense, and we are missing relevant nodes capable of supporting the diffusion of information related to crypto assets. These nodes (social media websites) have potential, but we are just observing the first stages of such a process.

6 Contribution to research and practice

This study provides an empirical analysis of the referral (online) network describing the diffusion process of information related to crypto assets. Our results show that the most central websites in this network are market sites, which indicates that adopters are exposed to information by chance and through ill-defined exploration. Specifically, crypto market information websites and trading websites provide up to date information and re-direct potential users towards other specialistic websites. Overall, we conclude that the adoption of these assets is at its very beginning. Low assortativity and average degree indicate that crypto assets are in their awareness stage, where the public attention to the existence of these assets is beginning to expand. Awareness can be enhanced when there are information flows about the innovative product (De Bruyn and Lilien 2008 ), and in the crypto assets landscape this is achieved by mass social communications, news outlets, and word-of-mouth communications; this is confirmed by the higher prominence of websites such as YouTube, LinkedIn, and Medium.

This study provides several contributions to research and practice. From a research perspective, we advance our understanding of how information about crypto assets is shared online, and how the diffusion process is currently structured in this context. By using a relational approach, we mapped the key global websites which contribute to the diffusion process, and we analyzed their referral network using advanced analytical network techniques. In this vein, our methodological approach is innovative because it combines web scraping, web analytics, and SNA to empirically detect initiators and influencers. Second, our study does not limit to cryptocurrency websites only (Park and Park 2020 ) or cryptocurrency users only (Bharadwaj and Deka 2021 ), but it explores the entire crypto assets world—and thus it offers a broader overview of the phenomenon. In terms of business implications, there are two main aspects emerging from this work. First, the aforementioned importance of social media channels is something that organizations offering crypto assets might want to capitalize. This does not mean that such organizations are not aware of the potentials of YouTube or LinkedIn: as described by Hua et al. ( 2022 ), cryptocurrencies are often used for donations to YouTube content creators, and a variety of contents about crypto assets can be found in social media channels. Footnote 4 However, this has not been done systematically, or establishing formal partnerships between organizations offering crypto-related products and social media platforms. What has been observed in recent studies (e.g. Moser and Brauneis 2023 ) is that professional financial advisors—which can be called ‘crypto-influencer’—are using social media for promoting crypto assets, but they mainly operate in a clickbait-shaped environment where organizations such as Ethereum are not directly involved in the creation of their contents. The second main practice-related contribution relates to something that is, in a way, diametrically opposed to what highlighted before, i.e. the importance of keeping blockchain-based solutions decentralized. Decentralisation is the foundation of crypto assets: the same concept of blockchain is based on this idea. Our analysis shows that websites of the much-sensationalized cryptocurrencies are not as powerful—in terms of information diffusion—as other websites. At the same time, social media platforms such as Facebook have started introducing their own cryptocurrency (Diem) using a permissioned and private blockchain, which is in contradiction with the whole idea of distributed ledger technology (Ferrari 2020 ). This should emphasize the value of using online and offline advertising systems for raising awareness among global customers, especially for those players who are well-recognized and capitalized—such as Bitcoin and Ethereum.

7 Limitations and directions for future research

Our findings produce novel insights on the role of social interactions explaining how global (online) network structures influence the adoption of crypto assets. While this study is able to expand previous research on crypto assets web dynamics (Park and Park 2020 ; Sakas et al. 2022 ), our results are limited by the following constraints. First, we were able to collect web analytics data and map the referral network by using the free version of SimilarWeb. Because of that, we constrained our data collection capacity to no more than five websites that are referred by and referred to. While this does not account for 100% of the referrals, our network still accounts for over 75% of them. Further research can concentrate on using other tools, such as Google Analytics, to collect web analytics data and compare advantages and disadvantages of using different algorithms for the data collection. Second, our study focuses on the most central website and the structure of the referral network, since this is strictly connected to our research objective. We believe that future research should look more in depth into the causal relationship between network centrality and web analytic measures, to test for social influence processes linked to adoption technology. Finally, our study relies on cross-sectional data reflecting individuals’ choices. This has an impact on the possibility to disentangle any sub-process, for instance social selection and social influence, related to innovation adoption. Since it has been recognized that individuals’ choices change over time and only longitudinal research design support this type of analysis, future studies are encouraged to implement a longitudinal research design to investigate how networks evolve in the crypto asset landscape.

The different types of crypto assets are provided in the guidance document ISO/TR 23455:2019. Another work on this topic has been published under the title ISO/TS 23258 “Blockchain and distributed ledger technologies — Taxonomy and Ontology”.

We also triangulate the data obtained from coinmarketcap with the data on coinbase to get the top 200 assets by market capitalization. We find minor discrepancies in the data from coinmarketcap and coinbase in terms of ranking of (some) assets but the top 200 remain the same

Some crypto assets have more than one official registered web address; hence, the number of websites is higher than the number of crypto assets.

Ethereum has even introduced the concept of decentralized social network, a blockchain-based system for social interactions and the sharing of contents (see here: https://ethereum.org/en/social-networks/ ).

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Vasudevan, S., Piazza, A. & Ghinoi, S. Information diffusion in referral networks: an empirical investigation of the crypto asset landscape. Qual Quant (2024). https://doi.org/10.1007/s11135-024-01978-8

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Accepted : 04 September 2024

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/ September 12, 2024

Atlas: Combining TradFi Performance With DeFi Transparency | Eugene & Frankie

In this episode, we’re joined by Frankie from Paradigm, and Eugene from Ellipsis Labs! We discussed the launch of the Atlas L2 private testnet, why Atlas is utilizing the SVM to build an Ethereum L2, and design decisions made along the way. Additionally, we dove into Atlas’ approach to handling MEV. Finally, we covered what the Atlas application set needs to contain on mainnet launch, and first party vs third party apps

Thanks for tuning in!

Atlas Announcement Thread: https://x.com/atlasxyz/status/1833880969251524973

Namada is the shielded asset hub rewarding you to protect the multichain. Enabling data protection for any existing asset, app, or chain, Namada introduces shielded cross-chain actions and rewards for shielding your assets, which strengthens data protection guarantees for everyone.

Namada is currently in its mainnet launch phase — follow along on namada.net

Join us at Permissionless III. Use code BELL10 for a 10% discount: https://blockworks.co/event/permissionless-iii

Follow Frankie: https://x.com/FrankieIsLost

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Subscribe on YouTube: https://bit.ly/3R1D1D9

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Timestamps:

(0:00) Introduction

(2:25) The Atlas L2

(4:47) Why Launch An SVM L2?

(10:01) The Differences Between SVM and EVM

(14:48) Opinionated vs Unopinionated Design Philosophy

(19:48) Token Incentivization and L2 Business Models

(27:00) Atlas Design Decisions

(35:11) Namada Ad

(36:10) The Great Rollup Debate

(42:09) Why Choose Ethereum As The Atlas Settlement Layer?

(51:31) Handling MEV On Atlas

(55:52) Should MEV Be Returned To Users?

(1:01:57) Developing More Apps

(1:04:54) First Party Apps vs Third Party Apps

Disclaimer: Nothing said on Bell Curve is a recommendation to buy or sell securities or tokens. This podcast is for informational purposes only, and any views expressed by anyone on the show are solely our opinions, not financial advice. Mike, Jason, Michael, Vance and our guests may hold positions in the companies, funds, or projects discussed.

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