Adoption of Digital Assets Among Traditional Hedge Funds Records a 66.5% Jump Since Last Year
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Adoption of Digital Assets Among Traditional Hedge Funds Records a 66.5% Jump Since Last Year

Elizabeth Kerr
Elizabeth Kerr
25th Jan 2023
  • Hedge Funds are warming up to digital assets.
  • Institutional adoption is the key driver of this uptake.

Hedge funds have long been key players in the financial world, but their involvement in digital assets has been relatively limited. That's starting to change, though, as more and more hedge funds are beginning to explore the potential of this asset class. While there are still some skeptics, the overall attitude towards crypto assets is becoming more positive.

According to a report, hedge funds investing in digital assets have jumped by 66.5% in the last year. That means one in three hedge funds has now invested in digital assets, compared to only one in five just twelve months ago. The site cites the increasing institutional interest in cryptocurrency as a key factor driving this trend.

Hedge Funds Adopting Digital Assets a Positive

CryptoMonday's CEO, Jonathan Merry, has been studying the trends in the sector and believes that the move by hedge funds is a positive development.

Hedge funds are typically very risk-averse, so the fact that they are starting to invest in digital assets is a vote of confidence in the sector. I think we will see more and more institutional investors getting involved in the space as time goes on. The influx of capital from hedge funds could help drive innovation and digital asset adoption. If you look at the history of technology, it's often big waves of capital that drive innovation. The fact that hedge funds are now starting to invest in this space is a very positive sign.
CryptoMonday CEO, Jonathan Merry

Ultimately, Merry believes that hedge fund managers who don't embrace digital assets will be at a competitive disadvantage in the years to come. "The future is digital, and those who don't evolve will be left behind."

Hedge Funds' Crypto Exposure Remains Low

Although hedge funds have shown increasing interest in crypto assets, many still have low exposure to this asset class. CryptoMonday reports that up to 57% of hedge funds hold less than 1% of their assets under management (AUM) in digital assets. Several reasons could explain this low exposure.

First, hedge fund managers are often risk-averse investors who focus more on preserving capital than generating returns. Second, the volatile nature of crypto assets makes them a difficult investment to value and manage. Finally, the lack of regulation in the crypto space means that there are few protections for investors.

As a result, many hedge funds have been reluctant to allocate a significant portion of their AUM to digital assets. However, there's a growing positive sentiment among players in the field. CryptoMonday again reports that up to 67% of funds with crypto exposure intend to increase their investments in digital assets.

Author Bio
Elizabeth Kerr
Elizabeth Kerr
Elizabeth ist eine Finanz-Content-Spezialistin aus Manchester. Zu ihren Spezialgebieten gehören Kryptowährung, Datenanalyse und Finanzregulierung.