Originally published on: October 10, 2024
The latest survey conducted by the Alternative Investment Management Association and PwC has unveiled an interesting shift in the world of traditional hedge funds. A whopping 47% of hedge fund managers trading in traditional markets have decided to dip their toes into the world of cryptocurrencies, thanks to the increasing regulatory clarity around spot Bitcoin and Ether exchange-traded funds (ETFs) in the United States and Asia.
This marks a significant increase from the 29% crypto exposure reported in 2023. Moreover, about 37% of the survey respondents admitted to having exposure to crypto in 2022, showcasing a steady rise in interest over the past few years.
According to James Delaney, managing director of asset management regulation at AIMA, this surge in crypto exposure among hedge funds can be attributed to the global regulatory clarity that is “boosting confidence” in the digital asset space.
Surprisingly, all traditional hedge funds currently involved with crypto have expressed their intention to either maintain or expand their positions. While 67% plan to keep their crypto investments steady, the remaining 33% are gearing up to increase their exposure in the near future.
The survey also delved into the strategies employed by hedge funds to gain exposure to crypto. A whopping 58% of hedge funds traded derivatives, while 25% dabbled in spot market token trading. However, it was noted that the spot market trading experienced a drop of over 50% compared to the previous year, indicating a shift in investment strategies.
Edward Chin, co-founder of Parataxis Capital Management, emphasized the potential for significantly higher returns in the digital asset market, highlighting the lucrative opportunities it offers compared to traditional asset markets.
Despite the growing interest in crypto, 76% of hedge fund managers with no current exposure to digital assets are still reluctant to adopt them in the next three years. Additionally, the report highlighted that two-thirds of traditional hedge funds do not plan to include spot Bitcoin BTC ETFs in their digital asset strategies.
In a related development, Lekker Capital’s chief investment officer, Quinn Thompson, made a bullish call on Bitcoin, suggesting that buying the digital asset at its then-current range of $61,000 was a “no-brainer.” He based his projection on Bitcoin’s price action, drawing parallels to a previous setup that led to a significant upward swing in prices.
From embracing crypto to predicting market movements, the hedge fund landscape is witnessing a wave of transformation. Stay informed about the latest trends and opportunities in the market by subscribing to the Markets Outlook newsletter. Get critical insights, spot investment opportunities, and refine your trading strategies – delivered every Monday. Subscribe now to stay ahead of the curve!
