Posted 3 weeks ago | by Catoshi Nakamoto
PricewaterhouseCoopers (PwC), one of the biggest accounting firms, has released its “3rd Annual Global Crypto Hedge Fund Report 2021” in collaboration with the Alternative Investment Management Association (AIMA) and Elwood Asset Management. The report indicated that over half of traditional hedge funds plan to invest into Bitcoin and cryptocurrency by next year.
The report is based on data from research in the first quarter of 2021, which illustrates that the total assets under management (AUM) of crypto digital asset hedge funds increased to $3.8 billion, up from $2 billion from the previous year. Additionally, the normal hedge fund return was a gain of 128% on investment. However, around one-fifth of traditional hedge funds say they are currently invested in digital assets (21%.) Further, more than 85% of those surveyed intend to put more capital into the cryptocurrency asset class by the end of 2021.
According to the report, 92% of cryptocurrency hedge funds manage exposure to Bitcoin. In comparison, Ether is held by 67% of the funds. Bitcoin also makes up a substantial portion of the trading volume. 56% of crypto hedge funds showed that at least half of their daily trading volume is in Bitcoin. If that’s not enough, 15% of cryptocurrency hedge funds trade exclusively in Bitcoin. Most crypto hedge funds trade Bitcoin, followed by Ethereum (67%), Litecoin (34%), Chainlink (30%), Polkadot (28%), and finally Aave (27%.)
PwC states there are between 150 and 200 active crypto hedge funds, while four out of five were launched between 2017 and 2020. About 31% of these crypto hedge funds use Decentralized Exchanges, with Uniswap being the number one most used at (16%), followed by 1inch (8%) and SushiSwap (4%).
According to the data, the best performance strategy for crypto hedge funds was Discretionary Long Only, which saw a rise of 294%.
The document also found that all but one single cryptocurrency hedge fund remains especially bullish on Bitcoin. The report stated that the median predicted price for Bitcoin by the end of 2021 was $100,000. If you needed even more hopium, 21% of cryptocurrency hedge funds predicted that Bitcoin’s price would be between $100,000 and $150,000 by the end of the year. Of those investors involved in crypto hedge funds, the report found that high net worth individuals comprise at least 54%, and family offices make up 30%.
On the flip side, most of the traditional hedge funds cited “regulatory uncertainty” as the reason for their procrastination entering the market and skepticism of the space.
“In terms of the main obstacles to investing, regulatory uncertainty is by far the greatest barrier (82%). Even those who do invest in digital assets cite it as a major challenge (50%). Client reaction/reputational risk is high (77%), as well as digital assets being outside the scope of current investment mandates (68%). Over half of the respondents said that they don’t have enough knowledge of digital assets (64%),” PwC wrote.
However, 64% acknowledged that “if the main barriers were to be removed, they would definitely start/accelerate their involvement/investment or potentially change their approach and become more involved.” Additionally, the report expressed that over half of traditional hedge funds reported that they were planning to invest in crypto digital assets within the next year. Although, the biggest thing to note in the report was that PwC expressed that 46% of all hedge funds are now investing in the crypto industry through Bitcoin and Ethereum trading, showing overall growth in institutional adoption compared to previous years.
Bitcoin is currently trading at [FIAT: $37,622.21] DOWN -3.8% in the last 24 hours, according to Coingecko at the time of this report.