Almost half of hedge funds known to invest in traditional asset classes have ventured into cryptocurrencies, per the published report of a survey by the Alternative Investment Management Association and PricewaterhouseCoopers.
According to the report, 47% of hedge funds traditionally focused on conventional assets now invest in cryptocurrencies, up from 29% in 2023 and 37% in 2022. Among these funds, 67% plan to maintain their current levels of cryptocurrency investments, while the remaining funds intend to increase their exposure by the end of 2024.
Many hedge funds initially entered cryptocurrency by trading tokens in the spot market. However, the report highlights a significant shift towards more advanced trading strategies, with 58% of funds engaging in crypto derivatives trading in 2024, up from 38% in the prior year. Meanwhile, the share of funds trading in spot markets has dropped to 25%, down from a peak of 69% last year.
The report indicates that many hedge fund managers remain cautious despite the increasing interest in cryptocurrencies. The survey found that 76% of those not currently invested in crypto are unlikely to alter their position in the next three years, a significant rise from 54% in 2023. Furthermore, it was noted that two-thirds of traditional hedge funds do not intend to incorporate Bitcoin ETFs into their existing crypto strategies.
This trend was primarily attributed to clearer regulations and the introduction of exchange-traded funds (ETFs) in the U.S. and Asia.
Notably, Fiorenzo Manganiello, co-founder and managing partner of LIAN Group, predicts that cryptocurrency ETFs will constitute 5% of hedge fund and pension fund portfolios by 2025. This forecast follows the success of BlackRock’s spot Bitcoin ETF, which has amassed $16.7 billion in assets since its January 2024 launch.
The survey was conducted in Q2 2024 and it included 100 hedge funds.
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