An increasingly popular Bitcoin, but… – The return in 2021 of the hedge funds focused on cryptocurrencies had exceeded that of traditional funds. Given these results, are they now betting on the assets of new finance?
Hedge funds and cryptocurrencies: an (always) cautious opening
PricewaterhouseCoopers (PwC) released a report on theadoption cryptocurrencies by traditional hedge funds. The document contains key figures on the subject. These data come in particular from a survey carried out in the first quarter of 2022, with 89 hedge funds.
And 3 statistics provide an overview of the current and future level of commitment of these funds in cryptocurrencies:
- About a third of study participants invest in digital assets;
- 57% of funds already committed to cryptocurrencies have allocated at least 1% of their assets under management to the sector;
- While 2 thirds of these funds plan to increase their investments in the industry, by the end of 2022.
What do these figures reveal? These data testify, on the one hand, to a gradual adoption cryptocurrencies by hedge funds. But they also show, on the other hand, a limited exposure of the latter to this new asset class.
How do these funds explain their cautious approach against cryptocurrencies? Respondents to the survey mention “regulatory and tax uncertainty” as a major obstacle to investment in the sector.
Specifically, hedge funds fear 2 points related to regulations:
- Differences in the regulatory framework on cryptocurrencies at the global level;
- The lack of clarity on the guidelines relating to the management of this asset class.
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Crypto bear markets: funds still bullish on Bitcoin and its cadets?
A better understanding of the context allows a richer interpretation of the previous data. The crypto bear markets give a particular color to this study. Indeed, the Bitcoin (BTC) and its juniors experience a bear market in 2022. The bull rally of 2021 has thus given way to the crypto winter this year.
The fall of the price of Bitcoin illustrates quite well the extent of the declines in the markets. Yet the price of the cryptocurrency had reached a historical high around $69,000 in November 2021. Thereafter, it did not manage to reconnect with 50,000 dollars in 2022. It will even return under the bar $30,000 This year.
What does this knowledge of the context add to the analysis of the figures published by PwC? According to this data, these funds already investing in cryptocurrencies want increase their exposuredespite these market shocks.
This prospect is obviously encouraging for the cryptosphere. But these statistics reveal for the moment only one intention. Reality-shaping decisions can, in fact, change as the situation changes.
Another question can serve as a conclusion of this article. A strong bullish recovery in crypto markets will it be mechanically accompanied by an increase in investments in cryptocurrencies by these funds?
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