An Annapolis hedge fund has raised $42.5 million to invest in cryptocurrency despite the enormous crash the asset class suffered in 2022.
Runa Digital Assets filed a Form D with the Securities and Exchange Commission in September disclosing the fund. CEO Jennifer Murphy said she believes that despite the volatility of cryptocurrency there is still huge potential in digital forms of money and will use the fund to invest in cryptocurrencies and other digital tokens that consumers can find on markets like Coinbase.
Cryptocurrencies have garnered a massive amount of public interest in the past several years, driving millions of Americans to include the new asset in their investment portfolio. Cryptocurrencies are based on the blockchain, a ledger showing a record of transactions that can prove the ownership of digital files. The wide interest in cryptocurrency is connected to the potential of blockchain technology to be used for things outside of an investment. The ledger system could be a way to tell if a video or a picture online is a real image or a fake created by an AI program. A blockchain ledger could provide evidence showing when a video was altered or created to determine if AI was used, Murphy said.
The potential global reach of cryptocurrencies drew Murphy away from her career in traditional finance as Chief Operating Officer of Western Asset Management, a global investment firm with over $475 billion of assets under management. Cryptocurrencies are becoming increasingly common internationally with countries like Vietnam and the the Philippines seeing high levels of crypto adoption.
People do not use cryptocurrency for everyday transactions, but to store money, Murphy said. Residents of countries with high inflation can use cryptocurrency in an attempt to preserve their finances in the face of fading value of traditional currencies and earn money when the price of a cryptocurrency increases. Cryptocurrencies are decentralized, so there is no central bank or organization directly with the ability to increase or decrease supply at will.
“If I'm going out to get a cup of coffee and I can spend my Brazilian Real or my bitcoin, I'm gonna spend my Brazilian Real because bitcoin is going to store value for me. I want to spend the currency that has high inflation and eroding value, as soon as possible,” Murphy said.
Runa Digital Assets faces several challenges in the new industry of crypto investment. Cryptocurrencies are an incredibly volatile asset with a constantly changing price. Bitcoin began trading at just nine cents per coin in 2010 before exploding to a price of $67,566.83 in 2021. In 2022, the value of cryptocurrencies crashed, with bitcoin falling by 63%. The currency has now recovered much of its value. Murphy blames much of the volatility on how new all cryptocurrencies are, so the true value of the technology is still unknown.
There are also plentiful scams based around cryptocurrency and bitcoin that reduce consumer confidence. Notable crypto-exchange and hedge fund FTX Holdings began chapter 11 bankruptcy proceedings in 2022 after several allegations of fraud. Runa Digital Assets takes a conservative approach toward investing in a market crowded with countless people trying experiments that will inevitably fail, Murphy said.
“There's thousands and thousands of experiments going on, most of which will fail, but some of them will get it right,” Murphy said.
