A growing number of traditional hedge funds are venturing into the world of cryptocurrencies, with nearly half now having exposure to digital assets, according to a new survey by the Alternative Investment Management Association and PwC.
The Global Crypto Hedge Fund Report highlights that increased regulatory clarity and the introduction of cryptocurrency exchange-traded funds (ETFs) in the US and Asia have been driving more investors toward the asset class, with 47% of hedge funds focused on traditional markets now have crypto exposure, up from 29% in 2023 and 37% in 2022.
Among those already investing in digital assets, 67% plan to maintain their current level of capital, while the remainder are looking to increase their investments by the end of 2024, according to the report/
Hedge funds that initially dabbled in cryptocurrencies through spot market trading are now expanding into more complex strategies. In 2024, 58% of funds involved in crypto were trading derivatives, a significant rise from 38% in 2023. Meanwhile, the share of funds trading in the spot market dropped to 25% after peaking at 69% the previous year.
Despite the growing interest though, not all hedge funds are convinced. The survey found that 76% of funds not currently invested in digital assets do not expect to change their stance in the next three years, up from 54% in 2023. One of the primary reasons cited is the exclusion of digital assets from investment mandates.
Furthermore, two-thirds of traditional hedge funds do not plan to incorporate bitcoin ETFs into their current digital-asset strategies, signalling a cautious approach toward integrating crypto into their portfolios.
Of the 100 hedge funds surveyed, 42% were focused on traditional assets, while the rest primarily invested in crypto. The survey was conducted in the second quarter of 2024, shortly after bitcoin reached its all-time high in March.
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