Crypto Hedge Funds Thrive Despite Market Volatility, PwC Report Reveals

The latest PwC 5th Annual Global Crypto Hedge Fund Report, released in July 2023, unveils a thriving crypto hedge fund industry, demonstrating resilience and growth despite the inherent market volatility.

The report highlights a significant surge in the total assets under management (AUM) by crypto hedge funds. The median AUM skyrocketed from $15 million in 2022 to a staggering $42 million in 2023, marking a nearly threefold increase. This substantial growth underscores the mounting confidence and investment in the crypto hedge fund sector.

Crypto hedge funds have also been delivering impressive performance, with the median fund returning 128% in 2023, a substantial leap from 30% in 2022. This robust performance, outpacing many traditional hedge funds, is likely to lure more investors into the crypto hedge fund space.

Quantitative funds, employing algorithmic trading strategies, continue to dominate the crypto hedge fund industry, representing 37% of the space. The rise of these funds indicates a growing sophistication within the sector.

Institutional investors are increasingly dipping their toes into the crypto hedge fund waters. The report notes a significant uptick in institutional participation, with the percentage rising from 24% in 2022 to 32% in 2023. This trend signals a broader acceptance and mainstream adoption of cryptocurrencies.

The regulatory environment also plays a pivotal role in the industry’s growth. The report reveals that 81% of the funds are regulated or registered with a government body, up from 77% in 2022. This trend towards regulatory compliance is a positive sign for the industry, indicating a move towards a more secure and regulated crypto market.

Geographically, North America continues to be in the lead with 49% of all cryptocurrency hedge funds worldwide. The Asia-Pacific area, which made for 22% of the world total in 2022, is currently making up ground, accounting for 28% of it.

Despite the industry’s expansion and strong success, the study also points out its inherent challenges and limitations. The top three risks cited by the funds are market risk, regulatory risk, and operational risk, highlighting the need of effective risk management measures in the crypto hedge fund business.


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Bitcoin Leads Bullish Trend with $125M Inflows in Overall Crypto Market

CoinShares reports a significant increase in investor bullishness towards digital assets, with a total inflow of $125 million in the past week. In the last fortnight, inflows totaled $334 million, representing nearly 1% of the total assets under management (AuM).

Bitcoin remains the primary choice for investors, with a massive $123 million inflow over the past week. Bitcoin investment products have bounced back to a net inflow year-to-date, overturning a net outflow position of $171 million just two weeks prior. Despite the recent uptick in price, short-Bitcoin investment products experienced a tenth consecutive week of outflows, now representing 59% of AuM.

However, short-Bitcoin remains the second-best-performing asset in terms of year-to-date inflows, with $60 million. As for altcoins, Ethereum leads the pack with inflows totaling $2.7 million, followed closely by Cardano, Polygon, and XRP. Multi-asset and Solana experienced minor outflows of $1.8 million and $0.8 million, respectively. Blockchain equities have also seen a resurgence, with inflows of $6.8 million following a 9-week streak of outflows.

The surge in digital asset investment and blockchain equities indicates growing investor confidence in the crypto industry.

The total AuM reached $37 billion during the week, matching the highest level since early June 2022 and the average AuM for 2022. Trading activity remains robust, with a weekly volume of $2.3 billion, substantially higher than the year-to-date average of $1.5 billion.


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Institutional crypto products eye record AUM as investors pile into Bitcoin

Institutional investors are continuing to pile into Bitcoin despite prices pushing up to a five-month high.

According to CoinShares’ Oct. 12 Digital Asset Fund Flows Weekly report, more than $226 million in capital flowed to institutional Bitcoin (BTC) products this past week. Bitcoin products dominated inflows for the third consecutive week, posting a week-over-week increase of 227%.

The heavy inflows coincided with the price of BTC gaining 12.5% for the week, with BTC sitting at around $54,000 on Oct. 8.

CoinShares attributes the positive shift in sentiment towards Bitcoin to recent statements from U.S. Securities and Exchange Commission (SEC) chairman Gary Gensler’s suggesting the long-awaited approval of the United States’ first Bitcoin exchange-traded fund (ETF) may be just around the corner.

The surging activity surrounding Bitcoin has seen the combined assets under management (AUM) of institutional crypto products push up to $66.7 billion last week — with CoinShares estimating the total is just 5% shy of the sector’s record AUM from May.

Products tracking altcoins have posted a mixed performance for the week, with Solana (SOL) and Cardano (ADA) products generating inflows of $12.5 million and $3 million respectively. However, funds offering exposure to Ether (ETH), Polkadot (DOT) and Ripple (XRP) suffered outflows of $13.6 million, $2.1 million and $600,000 each.

Crypto investment products have now posted inflows for eight weeks in a row.

Related: Billionaire Bill Miller advocates for Bitcoin, but doubtful on altcoins

Many onlookers are attributing BTC’s recent bullish momentum to expectations that the SEC will soon approve a futures-based Bitcoin ETF.

While the SEC has previously shot down every application it has received for physically-backed Bitcoin ETFs, the SEC is currently deliberating a four applications for exchange-traded funds based on the Chicago Mercantile Exchange’s (CME) regulated futures contracts.

With CME’s futures markets offering a product that is already insured and overseen by U.S. regulators, pundits such as senior ETF analyst for Bloomberg Eric Balchunas believe that Bitcoin futures ETFs are “likely on schedule” to receive a regulatory green light this month.