according to bloomberg reportA recent survey 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 showed that 47% of traditional hedge funds now have investments in digital assets to some extent. This is a significant increase from 37% in 2022, although down from 29% in 2023.
Of the hedge funds already invested in digital assets, about 67% plan to maintain their current levels of capital in crypto, while the remainder expect to increase their allocation by the end of 2024.
The report highlights a change in hedge fund investment strategies, moving from trading tokens 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 figure has increased to 58% in 2024. In contrast, the percentage of hedge funds trading in the spot market is projected to fall from 69% in 2023 to 25% in 2024.
A major driver behind the increase in crypto exposure is increasing regulatory clarity launch Crypto exchange-traded funds (ETFs) in the US and Asia. James Delaney, managing director of asset management regulation at AIMA, says:
The findings of this year’s report indicate a continued improvement in confidence compared to last year. This is really regulatory clarity that we have started to see globally. This clarity is certainly increasing confidence in the asset class.
While digital assets remain volatile, their sharp price fluctuations provide attractive trading opportunities for funds with high risk tolerance.
Parataxis Capital Management co-founder Edward Chin emphasized that traditional investment strategies can help investors make extreme profits, noting that the crypto market is “less efficient.”
By “less efficient” Chin may mean that there are greater information gaps, price anomalies, and volatility in the crypto market than traditional markets. This allows skilled investors to capitalize on these inefficiencies to generate higher returns using proven investment strategies.
Some hedge fund managers still hesitant about crypto
Despite the encouraging survey results, some hedge fund managers have kept their distance from digital assets. 76% of hedge funds that do not currently hold digital assets say they are unlikely to change their minds in the next three years, up from 54% in 2023.
For some, the existing regulatory framework for digital assets is still too immature to justify their inclusion in their portfolio. For example, in July 2023, Nasdaq stopped It plans to launch a crypto custody business, citing regulatory uncertainty surrounding the emerging asset class.
In related news, a recent survey in Japan found Most institutional investors are willing to invest in digital assets within the next three years. At press time BTC is trading at $61,034, down 1.5% over the past 24 hours.
Featured image from Unsplash.com, chart from tradingview.com
