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More hedge funds are pouring money into crypto despite volatility

Among the traditional hedge funds surveyed, 38% are investing in digital assets, up from 21% a year earlier.

According to PwC’s 4th Global Cryptocurrency Hedge Fund Report 2022, volatility in the crypto sector has not deterred many traditional hedge funds from investing in cryptocurrencies.

John Garvey, global financial services lead at PwC US, said: “The recent demise of Terra has demonstrated the potential risks in digital assets. There will continue to be volatility, but the market is maturing, with not only more crypto-focused hedge funds, higher AuM, but more traditional funds entering the space electronic money.

Among the traditional hedge funds surveyed, 38% are investing in digital assets, up from 21% a year earlier.

The number of professional crypto hedge funds is estimated to be more than 300 globally, with their establishment rate increasing rapidly during the past two years.

According to the report, 57% of funds have less than 1% of total assets under management (AuM) in digital assets. However, 20% of funds with digital assets account for between 5% and 50% of AuM.

Furthermore, two-thirds of funds currently investing in digital assets intend to deploy more capital later this year.

For the professional crypto hedge funds surveyed, the average AuM more than doubled, from $23 million the year before to about $59 million.

Between 2020 and 2021, the percentage of crypto hedge funds with AuMs in excess of $20 million has increased from 46% to 59%.

Cryptocurrency hedge funds continue to post strong growth despite the volatility. PwC report says the average crypto fund has grown +63.4% in 2021.

The number of traditional hedge fund managers who do not invest in digital assets is declining, from 79% a year ago to 62%.

Regulatory uncertainty seems to be a key issue for hedge funds, whether they are currently investing in digital assets or not.

89% of hedge fund managers currently investing in digital assets cite lack of regulatory clarity and tax as the top challenge.

For regulators not currently investing in crypto, regulatory uncertainty ranks as the main obstacle by 83%.