Professor Coin: Do Tried Crypto Funds Outperform the Market?

At Birmingham Business School ( BBS ), is Professor of Finance and Financial Technology and Head of the Department of Finance.

The Professor Coin column’s third installment features significant insights from scientific work on cryptocurrencies that have been published to the viewership. In this article, we’ll check crypto money.

In recent years, bitcoin have become more financially secure. Investors who wanted to buy the coins themselves from markets, study cryptocurrency technology, how to manage their own locks, and deal with managing their crypto property themselves had to do so at the beginning.

According to Nobel Prize winner Robert Shiller, the only way to gain exposure was to keep longer the cryptocurrencies themselves. Just being able to go longer on Cryptocurrency was the catalyst for the price bubble in 2017.

But, from 2017 crypto items became introduced to the wider finance area. Gaining exposure to the crypto industry has never been easier, from the Reit and CBOE’s introduction of Cryptocurrency futures contracts in December 2017, to the futures ETF’s list in January 2024, and more recently, the futures ETF’s list in January 2024.

Investors can now get exposure to the industry by purchasing crypto funds, which manage portfolios made of water, digital tokens expertly managed by expense teams that usually bring together finance and technology experts. According to data from Crypto Fund Research, these funds have an average asset under management ( AUM) of more than$ 150 million, with fees comparable to those of hedge funds ( management fees are about 2 % and performance fees are about 22 % ).

These funds merely make investments in bitcoin and purpose to time the market so that their clients ‘ businesses outperform the market. But how effective have they been and what warning signs do they send to the business?

Bianchi and Babiak ( 2022 ), the first study to examine the performance of crypto funds, found that the funds produce significantly higher returns and alphas ( excess returns above a benchmark ) as opposed to passive benchmarks and conventional risk factors. Additionally, they demonstrate that this functionality may be explained by the fund managers ‘ “luck,” implying that these resources are outperforming the crypto industry.

However, a follow-up study by Dombrowski et al ( 2023 ) show only a few crypto funds have superior skills and given the non-normal (skewed ) nature of fund returns, the choice of the performance measure affects the rank order of funds, therefore we should be careful in judging their performance.

Conlon et al., a recent study, and others ( 2025 ) have discovered that funds produce remarkable excess returns while the best performing funds will continue to perform well in the future, and that this outperformance is attributable to the managers ‘ ability to market timing.

Are there, however, any features that contribute to a blockchain fund’s greater ability to outperform the market? According to a recent study by Urquhart and Wang ( 2023 ), crypto funds with managers with prior experience with hedge funds achieve significant returns, while managers with a crypto/blockchain background do not perform better. These findings demonstrate that the success of bitcoin cash depends largely on the extent of the organization’s management experience, regardless of the sector.

Thus, the scientific writing suggests that investing in crypto funds is beneficial because they can outperform the market and enable some managers to provide above-average returns. However, with the introduction of Bitcoin and Ethereum place ETFs in 2024, another spot Stock approvals looming, and the Trump administration’s entrance into the White House, it remains to be seen whether these managed money continue to outperform the market.

For more information, view:

Bianchi, D., Babiak, M. ( 2022 ). on crypto cash ‘ efficiency. , 138, 106467.

Conlon, T., De Mingo-López, D. V., Urquhart, A. ( 2025 ). The ability to maintain market timing and boldness of bitcoin money. Working papers.

Dombrowski, N., Drobetz, W., Momtaz, P. ( 2023 ). The effectiveness of bitcoin funds. , 228, 111118.

Shiller, R. J. ( 2017 ). What is cryptocurrency actually worth? Don’t even question. .

Urquhart, A., Wang, P. ( 2023 ). No Cryptocurrency Experience Required: Managerial Characteristics in Cryptocurrency Fund Performance. : Vol. 3: No. 4, pp 529-569.