Despite a decline in the proportion of traditional hedge funds investing in crypto assets over the past 12 months, the long-term outlook remains positive, according to a new report by Big Four accounting firm PricewaterhouseCoopers (PwC). The Global Crypto Hedge Fund Report found that the percentage of funds with crypto exposure fell to 29% from 37% in 2022, while no traditional hedge funds plan to decrease their exposure this year.
More than a third (37%) of funds without crypto exposure said they are curious, but are waiting for the asset class to mature further. That’s up from the 30% reported a year ago. More than half, 54%, said they are unlikely to invest in the next three years, compared with 41% in the previous report.
The report speaks to a mixed sentiment toward crypto from traditional financial institutions, with regulatory uncertainty the watchwords. PwC found that almost a quarter of hedge funds are reassessing their strategies due to the regulatory environment in the U.S., with 12% considering relocating from the U.S. to more crypto-friendly jurisdictions.
Despite market volatility, a fall in digital asset prices and the collapse of a number of crypto businesses, Jon Garvey, PwC United States’ global financial services leader, said, “Investment in crypto-assets is expected to remain strong in 2023. Traditional hedge funds, committed to the market in the longer term, are not only increasing their crypto-assets under management, but also maintaining – if not increasing – the amount of capital deployed in the ecosystem.”