WHEN EVEN Ray Dalio, the billionaire who runs the world’s biggest hedge fund, says he prefers Bitcoins to bonds, should Wall Street traders think about setting up their own crypto hedge funds and launch into a fabulously profitable career?

Here’s my short answer: No.

The crypto hedge fund industry is still too small. It had just $3.8 billion total assets under management as of 2020, according to a recent survey conducted by PricewaterhouseCoopers LLC in partnership with Elwood Asset Management LLP. That pie is shared among 150 and 200 funds and there isn’t a star performer emerging from the lot. Just a little more than half manage less than $20 million each.

As a result, even though crypto funds can charge their clients a lot — 2% management and 20% performance fees are the norm — many will still find it hard to break even. Consider that a median fund manages only $15 million, which gives it $300,000 in annual revenue. That is the equivalent of a single Wall Street salary! And a fund of that size typically employs six people. Without performance fees, which don’t kick in until the funds hit their high-water mark, managers can’t even pay staff salaries. Forget about keeping yourself in the Wall Street style you’ve grown accustomed to.

Many funds would have done just fine last year. Soaring prices in Bitcoin and Ethereum gave a median fund a 128% return, or $3.8 million earned from performance fees. But what about this year? Bitcoin saw as much as 47% drawdown from its mid-April high.

At issue is the lack of institutional money. High net worth individuals are by far the biggest investors, accounting for over half the money in existing crypto hedge funds; next are family offices with 30%, according to the survey by PwC and Elwood. You won’t find a big California pension fund here. There’s not much contribution from fund of funds, or asset management firms. If anything, even the little that’s already invested may flee. Bitcoin may offer upside because it does seem to rise dramatically. But it also goes down dramatically.  Professional money managers will have trouble explaining that to their investors. They might as well hang on to gold.

Can crypto funds justify their hefty fees? Last year, when cryptos got hot, the portfolio returns of these funds fared poorly against their benchmark — the percentage price increase of a Bitcoin, regardless of strategy. The fund managers might explain that the inferior returns were the result of smoothing crypto’s extreme volatility — that is, an accounting method to level out fluctuations. But will that make their rich clients any happier? If Bitcoin spikes to $500,000 — as Cathie Wood believes — investors might not get the full upside.

Money will only get tighter from now on for these crypto hedge funds. Don’t be surprised if some start folding. Yes, Dalio has some Bitcoin — he is a billionaire and can afford to throw some money that way. Or away.  But the real question is whether he will start up a crypto fund — or even invest in one. Wall Street trader, don’t quit your day job.