Nearly Half of Hedge Funds Embrace Crypto Amid Regulatory Clarity

In light of growing regulatory clarity surrounding spot Bitcoin and Ether ETFs, nearly half of traditional hedge funds are now investing in digital assets.

A recent survey by the Alternative Investment Management Association (AIMA) and PwC found that 47% of hedge fund managers engaged in traditional markets have cryptocurrency exposure, a significant increase from 29% in 2023 and 37% in 2022.

James Delaney from AIMA noted that this positive trend reflects a recovery in confidence among hedge funds. Currently, all hedge funds involved with crypto are either maintaining or planning to increase their investments, with 67% intending to keep their current positions and 33% looking to expand.

To gain crypto exposure, hedge funds are employing various strategies, with 58% trading derivatives and 25% participating in spot market transactions. Despite the increase in derivatives trading, spot trading has declined by more than 50% compared to the previous year.

Edward Chin, co-founder of Parataxis Capital Management, emphasized that the less efficient nature of the crypto market allows for potentially higher returns compared to traditional assets. However, a notable 76% of hedge fund managers without current crypto investments do not plan to adopt them in the next three years.

Additionally, about two-thirds of traditional hedge funds have no intention of incorporating spot Bitcoin ETFs into their strategies. On October 3, Quinn Thompson, CIO of Lekker Capital, expressed optimism about Bitcoin’s price, suggesting that purchasing it at around $61,000 was a wise decision, especially given its price action since reaching an all-time high of $73,700 earlier this year.