- 12% hedge funds are considering moving from the US to crypto-friendly jurisdictions.
- The findings are part of a recent report on hedge funds investing in crypto, published by PwC.
The share of traditional hedge funds investing in crypto assets fell to 29% this year, compared to 37% in 2022. However, confidence in the value proposition and long-term sustainability of digital assets appears robust.
The findings are part of the 2023 Global Crypto Hedge Fund Reportpublished by the accounting firm PricewaterhouseCoopers (PwC) on 12 July.
PwC has prepared this report together with the Alternative Investment Management Association (AIMA) and CoinShares. It includes findings from two studies, one of traditional hedge funds and another of crypto hedge funds.
According to the report, the average allocation to crypto assets managed by traditional funds has increased from 4% to 7% over the past 12 months. This year, no traditional fund plans to reduce its exposure to digital assets.
In terms of the opinion of crypto hedge funds, 93% of them expect the market cap of these assets to be higher by the end of 2023 than by the end of 2022.
How current market conditions affect crypto investments
But the current regulatory environment in the United States is having a rather negative impact on hedge fund investors’ market sentiment towards investing in virtual assets.
23% of traditional hedge funds are reevaluating their virtual asset investment strategy due to country regulations. Currently, 71% of these funds are not invested in crypto, compared to 63% in 2022.
On the other hand, 50% of crypto hedge funds believe that recent market volatility has had no impact. However, 12% of them are considering moving from the US to crypto-friendly jurisdictions. Businesses are expecting more transparency and regulatory requirements after the failure of several ventures last year.
None of the survey participants said they had invested in non-fungible tokens (NFTs). By 2022, one in five traditional hedge funds will be invested in NFTs.
John Garvey, Global Financial Services Leader, PwC US, said:
“Despite market volatility, a fall in digital asset prices and the collapse of a number of crypto companies, crypto asset investment is expected to remain strong in 2023. … However, it is clear that regulatory uncertainty and barriers are increasingly weighing on many funds’ investment decisions, with more than half of those surveyed noting that they are likely to invest/invest more in digital assets once there is more transparency, legal certainty and risk management.