PwC research shows: 21% of hedge funds are involved in cryptocurrencies! Besides Bitcoin, what else are they buying?
According to the latest report released by PricewaterhouseCoopers (PwC), one of the Big Four accounting firms, approximately 21% of hedge funds in the traditional financial sector are investing in cryptocurrency.
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Hedge Funds and Cryptocurrency
According to the third annual "Global Crypto Hedge Fund Report" published by PwC, which cited market data released by Elwood Asset Management in the first quarter of this year, it analyzed the interaction between traditional hedge funds and the cryptocurrency market from 2019 to 2020. The research shows that around one-fifth of traditional hedge funds (approximately 21%) invested in cryptocurrencies in 2020, with the majority opting for quantitative trading.
However, the performance of quantitative trading was the worst, while subjective trading funds significantly outperformed quantitative trading.
Furthermore, the vast majority of cryptocurrency hedge fund investors are high-net-worth clients (54%) and family offices (30%).
On average, these institutions have allocated around 3% of their total assets under management to digital assets, and almost all institutions (85%) plan to purchase more cryptocurrencies by the end of 2021. On the other hand, PwC's research also indicates that Bitcoin remains the favorite asset for hedge funds, with approximately 92% of hedge funds trading this asset. Following Bitcoin are Ethereum (67%), Litecoin (34%), Chainlink (30%), Polkadot (28%), and Aave (27%).
Embracing the Challenges of Cryptocurrency
Among hedge fund managers who have not invested in cryptocurrencies, approximately 26% of respondents stated that they are considering or intend to invest in crypto assets in the future. However, about 82% of these respondents believe that regulatory uncertainty remains the main barrier to mainstream adoption of crypto assets.
Meanwhile, institutions that have already invested in crypto assets indicate that there are significant development challenges, such as excessive customer response/reputation risks (77%) and cryptocurrencies being outside the regulatory scope (68%).
The report concludes that if the aforementioned entry barriers can be eliminated, the remaining hedge funds that have not invested in cryptocurrencies will certainly begin investing or engage more actively in the cryptocurrency market through other means.