Hedge funds re-evaluate their crypto strategy

The native funds in the sector maintain their confidence with regard to crypto-assets. The traditional hedge funds on the other hand, are expressing reservations short-term, without deserting. They also see the tokenization the main opportunity from 2023.

The events of 2022 in the ecosystem have naturally left their mark, and not just on crypto-asset prices and the attitude of regulators. On the hedge fund side too, strategy is evolving in 2023.

This is what the Global Crypto Hedge Fund Report by PwC. Native players in the sector are staying the course, no doubt accustomed to the cyclical nature of the market. The traditional hedge funds on the other hand, are more divided, according to the firm.

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Hedge funds increase average allocation

First observation: funds have not deserted the market. However, 29% of them are investing in crypto-currencies this year, compared with 37% a year earlier. For all that, PwC notes that none of the traditional funds present plans to reduce its exposure in 2023.

Over the past year, the average allocation to digital assets managed by traditional hedge funds has risen from 4% to 7%. This trend seems to be largely explained by a quest for capital gains in bear markets.

Indeed, 93% of crypto hedge funds surveyed expect crypto-asset market capitalization to be higher by the end of 2023.

Fewer new entrants to crypto

Among players not yet exposed to these assets, the mood is also more one of caution.

More than a third (37%) of traditional hedge funds that do not invest in crypto-assets say they are curious but expect greater asset maturity – an increase from the 30% reported last year,” reads the report.

But as PwC points out, funds are showing themselves divided. Thus, 54% of respondents consider it unlikely that they will invest over the next three years. This represents an increase of 13 points (41%) over one year.

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To stop their investment strategythe hedge funds take into account various factors, including the regulatory framework. And the latest developments in this area have not gone unnoticed.

23% of traditional hedge funds are reassessing their crypto strategy due to the regulatory environment in the US, PwC measures.

Tokenization gains consensus among funds

Despite the threat of relocation brandished by the local crypto industry, the time is not yet ripe for exodus, he adds.

12% of crypto hedge funds are considering leaving the US to relocate to crypto-friendly jurisdictions,” says the firm.

As for traditional funds, public blockchain tokens aren’t the only topic of interest. A framework of BlackRock declared in June, the impact of tokenization promises to be monumental. And the funds are not mistaken. 31% of traditional hedge funds consider tokenization to be a key factor in their success. tokenization as the biggest opportunity of 2023.

Tokenization isn’t just of interest to crypto market participants. It is attracting wider interest. 25% of traditional hedge funds – including those not currently investing in crypto – say they are exploring tokenization.

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