🌎 Hedge Funds Embrace Crypto Amid Regulatory Clarity, ETF Launches

Nearly half of hedge funds focused on traditional assets now have crypto exposure, driven by regulatory clarity and the launch of ETFs, according to a new survey.

Growing Interest in Cryptocurrencies Among Hedge Funds

A growing number of hedge funds focused on traditional asset classes are embracing crypto, driven by enhanced regulatory clarity and the launch of exchange-traded funds in the U.S. and Asia. According to a new survey by the Alternative Investment Management Association and PricewaterhouseCoopers, 47% of hedge funds trading in traditional markets now have exposure to cryptocurrencies. This is a significant increase from 29% in 2023 and 37% in 2022.

Investment Plans and Strategies

Among these funds, 67% plan to maintain their current level of investment in cryptocurrencies, while the remainder intend to increase their exposure by the end of 2024.

Shift in Trading Strategies

Initially, many hedge funds ventured into crypto by trading tokens in the spot market. However, the report indicates a shift towards more sophisticated trading strategies. In 2024, 58% of funds involved in crypto are trading derivatives, up from 38% the previous year. Concurrently, the proportion of funds trading spot markets has decreased to 25% from a peak of 69% last year.

Hesitation Among Some Hedge Fund Managers

Despite the growing interest, some hedge fund managers remain hesitant. The survey revealed that 76% of those not currently invested in crypto are unlikely to change their stance in the next three years, an increase from 54% in 2023.

Bitcoin ETFs and Traditional Hedge Funds

Additionally, two-thirds of traditional hedge funds do not plan to integrate Bitcoin ETFs into their existing crypto-focused strategies. The survey, which involved 100 hedge funds — 42% focusing on traditional assets and the rest on crypto — was conducted in Q2.