Traditional Hedge Funds Not Deterred by Crypto Market Downturn and Volatility

While the overall cryptocurrency market has been within the crimson for many of 2022, current studies reveal that extra conventional hedge funds are nonetheless investing in digital belongings, with the variety of such entities estimated to succeed in 300.

More Traditional Hedge Funds Getting Into Crypto

According to the 4th Annual Global Crypto Hedge Fund report by PricewaterhouseCooper (PwC), 89 hedge funds had been concerned in a survey performed in Q1 2022.

The analysis revealed that 38% of conventional hedge funds had been already investing in cryptocurrency, a soar from 21% recorded a year in the past. Also, two-thirds of the entities surveyed presently investing in digital belongings want to enhance their allocation by the tip of 2022.

Last April, British hedge fund big Brevan Howard deliberate to speculate 1.5% of its capital into varied cryptocurrencies. A earlier survey from June 2021 revealed that almost 100% of hedge funds intend to allocate 7.8% (on common) of their portfolios into crypto by 2026.

Traditional hedge fund managers not concerned in such funding diminished to 62%, in comparison with 79% within the earlier year. Meanwhile, 29% of these not buying digital belongings are both planning to speculate or are on the late stage of their funding plans.

On the opposite hand, the PwC report famous the estimated variety of specialist crypto hedge funds is 300 globally, including that new entities have been created at an accelerated rate up to now two years.

The most-traded digital asset for crypto hedge funds was Bitcoin, with Ether coming second, adopted by Solana, Polkadot, Terra, and Avalanche.

Regulatory Uncertainty a Major Hindrance for Crypto Investment

Although extra conventional hedge funds are entering into crypto, most nonetheless train warning. According to the survey, 57% allotted lower than one p.c of their whole belongings below administration (AUM) to cryptocurrency.

Also, 41% of asset managers not investing in digital belongings mentioned they aren’t prone to achieve such publicity within the subsequent three years. Another 31% are interested in cryptocurrency however desire to attend until the market reaches strong maturation.

Meanwhile, regulatory uncertainty was the most important barrier for respondents not concerned in crypto funding, whereas hedge funds with such publicity mentioned that the absence of tax and regulatory readability was a significant problem.

Global Financial Services Leader, PwC United States, John Garvey famous that though the crypto market got here with dangers and volatility, that has not hindered the normal hedge funds from making crypto investments.

“The recent collapse of Terra vividly demonstrated the potential risks in digital assets.  There will continue to be volatility, but the market is maturing and with that is coming not only many more crypto-focused hedge funds and higher AuM, but also more traditional funds entering the crypto space.”