Hedge Funds Flock to Crypto 33% to Increase Investment by 2024

A survey published by the Alternative Investment Management Association and PwC on October 10, 2024, notes that roughly traditional hedge fund managers are now holding crypto.  

One of the primary reasons behind the surged interest of traditional giants is the clarity of regulatory commissions in the United States and Asia, along with the approval and launch of the Bitcoin spot ETF. 

As per the report, 33% of funds are planning to boost their investment by the closing of Q4 2024; at the same 67% of investors intend to maintain their position. The majority of hedge funds debuted the digital asset with spot trading of tokens, but a shift in trading strategy occurred in 2024 with the involvement of 58% of funds. 

The trading of crypto derivatives surged 38% in 2024 compared to that in 2023, although spot trading this year has surged to 25% from 69% in 2023. It is worth noting that 2/3rd of mainstream hedge funds do not intend for Bitcoin ETFs interaction in the current strategy. 

The report is compiled after reviewing data from 100 hedge funds with a total of $125bn in assets under management. Among digital asset-focused hedge funds, 12% are already investing in tokenized assets, although regulatory challenges remain the biggest hurdle to wider adoption.

The report quotes, “Despite the industry’s growth, many traditional hedge fund managers remain hesitant, with 76% of those not currently invested in digital assets unlikely to enter the space within the next three years, up from 54% in 2023.” 

Penetration rate of digital assets has helped cryptocurrencies establish their presence in the portfolio of traditional hedge funds. 

Regulatory Challenge the Biggest Hurdle Behind Adoption?

Yes, regulatory uncertainty has been a major fear factor for traditional finance giants seeking to explore the cryptocurrency sector. However, the regulators of a few nations are cooperative and have a soft hand in the digital asset market with a favorable set of rules and regulations. 

The Securities and Exchange Commission of the United States is known for its harsh treatment of cryptocurrencies, which is one of the main reasons why traditional fund managers and other institutional investors avoid diving into the crypto market. 

Todayq reported on October 09, 2024, that the U.S. The Attorney’s Office for the District of Massachusetts had charged 18 individuals and entities over fraud and manipulation in the cryptocurrency market.

The U.S SEC has imposed nearly $4.7 billion worth of enforcement actions against crypto firms and executives in 2024, an over 3,000% growth from the previous year. 

A Social Capital Market report quotes, “Since 2013, the SEC has levied over $7.42 billion in fines against crypto firms and individuals, of which 63% of the fine amount, i.e., $4.68 billion, came in 2024 alone.”

Back-to-back penalties and lawsuits by the commission highlight its clear outlook on the crypto market and the volatility factor. In 2024, the SEC imposed the highest fine on TerraForm Labs and its founder, Do Kwon. 

However, yesterday the Securities and Exchange Commission of Thailand initiated a proposal for investment opportunities for mutual and private funds, allowing them to invest in cryptocurrency products.