New research from PricewaterhouseCoopers (PwC) shows that traditional hedge funds are slowly embracing cryptocurrency investments, but their exposure is limited as the market continues to mature.
About a third of traditional hedge funds surveyed are already investing in digital assets such as bitcoin , PricewaterhouseCoopers said in its fourth annual Global Crypto Hedge Fund Report for 2022 . So-called “multi-strategy” hedge funds are the most likely to invest, followed by macro-strategy companies and equity-strategy companies.
Among hedge funds currently investing in the crypto space, 57% have less than 1% of their total assets under management allocated to cryptocurrencies. Two-thirds of companies investing so far plan to increase their investments by the end of 2022.
Funds surveyed cited “regulatory and tax uncertainty” as the biggest barrier to investing. Specifically, hedge funds are concerned about a globally fragmented regulatory environment and unclear guidance on how to govern the asset class.
The survey was conducted in the first quarter of 2022, and a total of 89 hedge funds participated.
Hedge funds and other traditional asset managers have been watching developments in the crypto space to see if they should start investing in the space. While some hedge funds have formed crypto units and started investing in the space, most are still on the sidelines. Interestingly, a 2021 survey of 100 hedge funds around the world showed that fund managers expect to allocate an average of 10.6% of their funds to cryptocurrencies within five years.
While crypto assets have been in a prolonged bear market for most of 2022, institutional investors seem to be buying the dips lately. Inflows into bitcoin investment products, such as exchange-traded funds and Grayscale’s GBTC product, rose by $126 million last week, according to CoinShares. Bitcoin investment funds have quietly inflowed over $500 million so far this year.
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