The Economics of Crypto Funds
Posted: 15 Jun 2021
Date Written: June 11, 2021
We compile a unique dataset combining token offerings data with insitutional investment data, as well as proprietary performance data of crypto funds. Crypto funds are a new intermediary in entrepreneurial finance markets that employ sophisticated investment strategies typically only seen in public equity markets thanks to the liquidity of cryptocurrency markets. We find that token offerings receive higher valuations in the presence of crypto funds and post-offering institutional investments are also characterized by a jump in the cryptocurrency price. Consistent with the asset management literature, we find that crypto funds underperform the market (interestingly even before fees). We also examine how these patterns vary in the cross-section of crypto fund types and startup characteristics.
Keywords: Cryptocurrency, Token Offerings, ICOs, STOs, Blockchain, Entrepreneurial Finance, Hedge Funds, Venture Capital, Decenrtalized Finance, DeFi
JEL Classification: G24, G32, K22, L26
Suggested Citation: Suggested Citation