Nearly 70% of crypto hedge funds to continue investing in digital assets despite choppy markets

4 months ago
3 mins read

Cryptocurrency hedge funds are expected to keep investing in digital assets despite the ongoing heightened market volatility. 

In this line, two-thirds of crypto hedge funds, at 67%, intend to pump more capital into the sector with a focus on two large caps assets of Bitcoin and Ethereum, the PwC’s Global Crypto Hedge Fund report published on June 10 indicates. 

In particular, Bitcoin remains the most attractive crypto owing to the asset’s ability to act as a store of value. In 2022, the survey indicated that the hedge funds at 86% invested in store of value assets, followed by decentralised finance (DeFi) at 78%, with infrastructure accounting for 74%, As per the report: 

“The wide variety of sectors crypto hedge funds have invested in last year clearly shows a form of diversification that was not present in earlier years. We believe this shows the continuing maturation of the industry as a whole.”

Hedge funds bullish on Bitcoin 

Notably, most hedge funds have remained bullish on Bitcoin’s price and market capitalisation. The report that collected feedback during Q1 2022 saw all the respondents predict that Bitcoin will end the year above the current price, with the median prediction at $75,000.

Hedge fund 2022 Bitcoin price predication. Source: PWC

With at least 300 cryptocurrency funds emerging in recent years, projections indicate that new participants will join the market by aligning with the historical trends. Notably, the growth of hedge funds in crypto has correlated with the rise in Bitcoin’s value. 

In this line, 29% of hedge fund managers yet to enter the crypto space noted that they are in the final stages of venturing into the market. However, the optimism around the sector is in contrast with the view of billionaire Mike Novogratz who believes that two-thirds of crypto hedge funds will go bankrupt. 

Hedge funds investment in UST 

The hedge funds are also inclined towards stablecoins, with USDC and USDT accounting for the highest share at 73% and 69%, respectively. During the survey, 27% of the respondents had invested in TerraUSD, which has since collapsed controversially

The researchers could not ascertain the amount invested in UST, but it was revealed that the hedge funds had utilised other stablecoins like USDC and USDT. 

On the downside, the hedge fund cited regulatory uncertainty as to the main barrier to crypto involvement. The ongoing regulation debate will likely result in high fees, especially with the continued institutionalisation of crypto hedge funds. 

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Justinas Baltrusaitis

Justin crafts insightful data-driven stories on finance, banking, and digital assets. His reports were cited by many influential outlets globally like Forbes, Financial Times, CNBC, Bloomberg, Business Insider, Nasdaq.com, Investing.com, Reuters, among others.