According to Bloomberg a reporta recent study found that nearly half of traditional hedge funds have some exposure to cryptocurrencies, with the degree of exposure expected to increase by the end of the year.
Traditional hedge funds are venturing into crypto
A survey conducted by the Alternative Investment Management Association (AIMA) and PwC revealed that 47% of traditional hedge funds now have some degree of exposure to digital assets. This is a notable increase from 37% in 2022, although down from 29% in 2023.
Among the hedge funds that have already invested in digital assets, about 67% plan to maintain the current level of their capital in cryptocurrencies, while the rest are expected to increase their allocations by the end of 2024.
The report highlights the shift in hedge fund investment strategies, moving from token trading in the spot market to more advanced strategies such as derivatives trading.
For example, in 2023, 38% of hedge funds surveyed traded digital asset derivatives. This number rose to 58% in 2024. Conversely, the proportion of hedge funds trading in spot markets fell from 69% in 2023 to 25% in 2024.
The main driver behind the rise in exposure to cryptocurrencies is increased regulatory clarity and He releases of exchange-traded funds (ETFs) in the United States and Asia. James Delaney, Managing Director of Asset Management Regulation at AIMA, notes:
The findings of this year’s report indicate that there has been a steady recovery in confidence over the past year. It’s really the regulatory clarity that we’re starting to see globally. This clarity certainly enhances confidence in the asset class.
While digital assets remain volatile, sharp fluctuations in their prices provide attractive trading opportunities for funds with a high risk tolerance.
Edward Chen, co-founder of Parataxis Capital Management, emphasized that traditional investment strategies can help investors achieve huge gains since the cryptocurrency market is “less efficient.”
By “less efficient,” Chen likely means that the cryptocurrency market has more information gaps, price discrepancies, and volatility compared to traditional markets. This allows skilled investors to take advantage of these shortcomings to generate higher returns using proven investment strategies.
Some hedge fund managers are still hesitant about cryptocurrencies
Despite the encouraging survey results, some hedge fund managers continue to move away from digital assets. 76% of hedge funds that do not currently own digital assets say they are unlikely to change their mind in the next three years, up from 54% in 2023.
For some, the current regulatory framework for digital assets is still too immature to justify adding them to their portfolios. For example, in July 2023, Nasdaq to stop Its plans to launch a cryptocurrency custody business, citing regulatory uncertainty around the emerging asset class.
In related news, a recent study was conducted in Japan Found The majority of institutional investors are ready to invest in digital assets within the next three years. BTC is trading at $61,034 at press time, down 1.5% over the past 24 hours.
Featured image from Unsplash.com, chart from TradingView.com