News & Blog

Hedge funds are increasingly investing in crypto, PwC research shows

Hedge funds are increasingly investing in crypto, PwC research shows

Hedge funds appear not to be losing interest in crypto, despite the increasing volatility in the sector. International accounting and tax advisory firm PwC recently released its 4th crypto hedge fund report of the year. It shows that the number of traditional hedge funds investing in crypto has actually increased from 21% a year ago, to 38% to date.

Most traditional hedge funds are just getting started, according to the report, as 57% have less than 1% of total assets under management in cryptocurrencies. However, for 20% of these funds, cryptocurrencies represent between 5% and 50% of assets under management. In addition, two-thirds of funds currently investing in cryptocurrencies plan to invest more capital in these assets by the end of this year.

John Garvey, global financial services leader at PwC United States, said in a related news release, "The recent collapse of Terra has vividly demonstrated the potential risks in cryptocurrencies. There will continue to be volatility, but the market is maturing and with that comes not only many more crypto-focused hedge funds and higher AuM (assets under management), but also more traditional funds entering the crypto space."

Assets under management is also increasing

Of the crypto-focused hedge funds surveyed, the average assets under management more than doubled from $23 million to $59 million in one year. Crypto hedge funds also continue to achieve strong growth, despite crypto volatility. PwC's report said the median crypto fund made a 63.4% profit in 2021.

Most crypto hedge funds invested in Bitcoin (BTC) at 86%; followed by Ethereum (ETH) at 81%; Solana (SOL) at 56%; Polkadot (DOT) at 53%; Terra (LUNA) at 49% and Avalanche (AVAX) at 47%.

Although more traditional hedge funds are investing in crypto, some remain cautious.

Still, the number of traditional hedge fund managers not investing in cryptocurrencies is shrinking, from 79% a year ago to 62% to date.

Regulatory uncertainty seems to be the main problem for hedge funds, whether they are currently investing in crypto or not. Lack of regulatory and tax clarity was cited as a major obstacle by 89% of hedge fund managers currently investing in crypto. For managers not currently investing in crypto, regulatory uncertainty was ranked as a major obstacle by 83%.

So despite the current market conditions, we see over the years that interest in cryptocurrencies and blockchain technology continues to grow. A young market generally comes with a lot of volatility and this is certainly the case with the crypto sector. Yet, when we look at the economy as a whole, we see that cryptocurrencies are not the only ones taking hits right now.

Luc Smits van Oyen
Coinmerce news