Financial and Economic Intelligence App learned that a recent survey shows that with the increase in regulatory transparency and the launch of Exchange Traded Funds (ETFs) on exchanges in the USA and Asia attracting more investors, nearly half of the hedge funds focusing on traditional asset classes are now investing in cryptos.

The Global Cryptocurrency Hedge Fund Report released last week by the Alternative Investment Management Association (AIMA) and PwC revealed that 47% of hedge funds trading in traditional markets hold digital assets, higher than 29% in 2023 and 37% in 2022. The survey found that among funds already invested in digital assets, 67% plan to maintain the same capital level in the crypto space, while the rest plan to increase investments by the end of 2024.

Although many hedge funds initially entered the crypto market by trading tokens in the spot market, they are now increasingly deploying more sophisticated strategies. The report shows that among funds involved in cryptos, 58% plan to trade derivatives in 2024, up from 38% in 2023, while funds trading in the spot market peaked at 69% last year, but dropped to 25% this year.

James Delaney, Managing Director of AIMA responsible for asset management oversight, stated:

"The results of this year's report indicate a steady recovery of confidence over the past year. We are starting to see regulatory clarity globally. This clarity undoubtedly boosts investors' confidence in this asset class."

Due to significant price fluctuations, cryptocurrencies often provide lucrative trading opportunities for risk-seeking funds.

Edward Chin, Co-founder of digital asset investment firm Parataxis Capital Management, expressed:

“Given the relatively low market efficiency, using traditional investment strategies can generate higher returns in the cryptos sector.” He stated, “In traditional asset markets, simple market-neutral arbitrage trading strategies can yield mid-to-high single-digit returns, but in the cryptos market, returns can go up to 20% to 30%.” He added that deploying a large amount of capital in a market still much smaller than traditional asset categories is a challenge.

But the opportunity is not limited to cryptos themselves. For example, after the bear market in 2022, the debt of digital asset companies may become attractive. In July, the media reported that hedge funds including Diameter Capital Partners, Canyon Partners, and Farallon Capital Management acquired the bankrupt crypto exchange FTX's debt owed to loan agency BlockFi for 0.8745 billion USD.

However, some hedge fund managers remain cautious. A survey shows that 76% of fund managers who have not yet invested in such assets are unlikely to change their minds in the next three years, a percentage higher than 54% in 2023. The main reason is excluding digital assets from their investment mandates.

The survey found that two-thirds of traditional hedge funds do not intend to include bitcoin ETFs in their current digital asset strategy.

Among the 100 hedge funds surveyed, 42% are funds investing in traditional assets, while the rest focus on cryptos. This survey was conducted in the second quarter when bitcoin reached a historic high in March. Currently, bitcoin is trading above $64,000 per coin, still about 10% below its all-time high.

编辑/Wade