47% of traditional hedge funds maintain crypto exposure: Report

Growing regulatory clarity around spot Bitcoin and Ether exchange-traded funds (ETFs) in the United States and Asia have encouraged nearly half of traditional hedge funds to gain exposure to digital assets.

A survey conducted by the Alternative Investment Management Association and PwC revealed that 47% of hedge fund managers trading in traditional markets had exposure to cryptocurrencies, according to a Bloomberg report.

Crypto exposure increased by 62% in 2024 compared to 2023 when only 29% of hedge fund managers reported involvement with digital assets. In 2022, just 37% of the 100 hedge fund respondents had exposure to crypto.

Regulatory clarity promotes crypto adoption

James Delaney, managing director of asset management regulation at AIMA, said global regulatory clarity is “boosting confidence” of hedge funds in crypto:

“The findings from this year’s report indicate a steady recovery in confidence over the past year.”

Additionally, all traditional hedge funds currently involved with crypto plan to maintain or expand their positions. While 67% plan to keep their crypto investments steady, the remaining 33% expect to increase their exposure in the near future.

Hedge funds used various strategies to gain exposure to crypto. According to the report, 58% traded derivatives, while 25% traded tokens in the spot market. Although the use of derivatives has increased, spot market trading dropped by more than 50% compared to last year.

Edward Chin, co-founder of Parataxis Capital Management, an investment firm focused on digital assets, highlighted the possibility of generating significantly higher returns in comparison to traditional asset markets:

“The application of traditional investment strategies can generate much higher returns in crypto given the market is less efficient.”

However, 76% of hedge fund managers with no crypto exposure said they are unlikely to adopt digital assets in the next three years.

Some traditional hedge funds stick to traditional mindset

The report noted that two-thirds of traditional hedge funds do not plan to incorporate spot Bitcoin (BTC) ETFs into their current digital-asset strategies.

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On Oct. 3, Quinn Thompson, the chief investment officer at Lekker Capital, said that buying Bitcoin in its then-current range of $61,000 was a “no-brainer.”

Basing the thesis on Bitcoin’s price action from March 5, when BTC reached a new all-time high of $73,700, Thompson highlighted a “similar setup” when Bitcoin defied a key technical indicator. 

He concluded that Bitcoin’s movement hinted that prices may soon swing upward. 

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