Many of the investors in the Pantera fund have not enjoyed its full 25,004 percent return. Some bought in at the beginning and then sold out when Bitcoin’s price was in a slow steady decline during 2014 and 2015. Others bought in during the current boom and have reaped only the returns that Bitcoin has experienced over the last year. Those still aren’t bad, at around 1,900 percent.
Those gains have given Pantera a lot of competition. More than 150 hedge funds focused on virtual currencies have been created this year, bringing the total number of such funds to 175, according to the research firm Autonomous Next.
Pantera estimated that in dollar terms, the fund has made $2.1 billion for its investors. Investors have taken out Bitcoins worth around $1.7 billion to hold for themselves, to avoid paying Pantera’s 0.75 percent annual fees. That has left Pantera holding coins worth $400 million. Overall, investors originally put about $150 million into the fund.
Like all hedge funds, Pantera is open only to accredited investors with significant assets. The minimum investment is $50,000.
The relatively straightforward strategy of the Pantera Bitcoin Fund, which has offices in San Francisco, could be replicated by small investors buying and holding Bitcoins.
But in its investor letter, Pantera noted that investors who go through Coinbase, the most popular service with small investors, pay fees ranging from 1.5 percent to 4 percent each time they buy or sell Bitcoin, creating more costs than Pantera charges its investors.
The Pantera Bitcoin Fund has developed strategies for buying and selling at good prices and also buys and holds an alternative to Bitcoin, Bitcoin Cash, which was created this summer.
Mr. Morehead said his fund has been attractive because it allows investors access to Bitcoin without going to Bitcoin exchanges, the places where people buy and sell the tokens, which have been hacked many times in recent years.
Several of the fund’s early investors came from the top ranks of the enormous asset manager the Fortress Investment Group. One of them, Michael Novogratz, is looking to start his own $500 million virtual currency hedge fund.
There have been a number of attempts to set up a similar fund for small investors, a so-called exchange traded fund, or E.T.F. So far, though, regulators have rejected those efforts.
Meanwhile, Pantera has expanded its own offerings with six other funds. Most recently, it began the Pantera Digital Asset Fund, which owns 25 virtual currencies, including several that were created through so-called initial coin offerings.
Mr. Morehead said there is a chance that the value of a Bitcoin could plummet to zero, given how early and undeveloped the technology still is. He said he tells investors to put only around 1 percent of their net worth in virtual currencies. But he thinks that 1 percent could do very well.
“There are a lot of famous people who have said Bitcoin is a joke,” he said on Monday. “They might be right. But if they are wrong and it goes up 25 times, they are missing out on a huge trade.”