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Traditional Hedge Funds Not Deterred by Crypto Market Downturn and Volatility

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While the overall crypto market has been in the red for most of 2022, recent reports show that more traditional hedge funds are still investing in digital assets, with an estimated number of such organizations as high as 300.

More Traditional Hedge Funds Get Into Cryptocurrency

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According to the 4th Annual Global Cryptocurrency Hedge Fund report According to PricewaterhouseCooper (PwC), 89 hedge funds participated in the survey conducted in the first quarter of 2022.

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The study found that 38% of traditional hedge funds have already invested in crypto, up from 21% a year ago. In addition, two-thirds of the surveyed organizations that currently invest in digital assets plan to increase their share by the end of 2022.

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Last April, British hedge fund giant Brevan Howard planned to invest 1.5% of its capital in various cryptocurrencies. The previous June 2021 survey showed that almost 100% of hedge funds intend to allocate 7.8% (on average) of their portfolios to crypto by 2026.

Traditional hedge fund managers not involved in such investments fell to 62% from 79% the previous year. Meanwhile, 29% of those who are not buying digital assets are either planning to invest or are at a late stage in their investment plans.


On the other hand, the PwC report notes that there are an estimated 300 dedicated cryptocurrency hedge funds worldwide, adding that new organizations have been created at an accelerated pace over the past two years.

The top selling digital asset for cryptocurrency hedge funds was bitcoin, followed by ether, followed by Solana, Polkadot, Terra, and Avalanche.

Regulatory Uncertainty Is a Major Barrier to Crypto Investments

While more traditional hedge funds are getting into crypto, most of them are still being cautious. According to the survey, 57% have allocated less than one percent of their total assets under management (AUM) to cryptocurrency.

In addition, 41% of asset managers who do not invest in digital assets said they were unlikely to get such an opportunity in the next three years. Another 31% are interested in cryptocurrency but prefer to wait until the market reaches sustainable maturation.

Meanwhile, regulatory uncertainty was the biggest hurdle for non-cryptocurrency investing respondents, while hedge funds at such risk said the lack of tax and regulatory clarity was a major concern.

John Garvey, Head of Global Financial Services at PwC in the US, noted that although the cryptocurrency market is risky and volatile, this does not prevent traditional hedge funds from investing in cryptocurrencies.

“The recent collapse of Terra clearly demonstrated the potential risks of digital assets. Volatility will continue, but the market is maturing, and with it, not only many other cryptocurrency-focused hedge funds and higher AuMs, but also more traditional funds are entering the crypto space.”

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