© Reuters. Merchants work on the ground of the New York Inventory Trade (NYSE) in New York Metropolis, U.S., July 11, 2023. REUTERS/Brendan McDermid
(This July 11 story has been corrected so as to add ‘CoinShares’ in paragraph 2 and ‘funds investing in crypto’ in paragraph 4)
By Nell Mackenzie and Elizabeth Howcroft
LONDON (Reuters) – World hedge funds not specialising in crypto belongings have grown skittish from current {industry} turmoil and this has result in an exit from the sector, a survey confirmed on Tuesday.
The proportion of conventional hedge funds investing in crypto-assets has dropped to 29% this yr from 37% in 2022, the report by PwC, CoinShares and the Different Funding Administration Affiliation (AIMA) stated.
1 / 4 of these at the moment invested stated elevated uncertainty over U.S. regulation of the sector could make them rethink the asset class altogether, it added.
Final yr’s market occasions affected funding choices for over 70% of hedge funds invested in crypto. In complete, 59 hedge funds had been surveyed, which oversaw a mixed $280 billion in belongings, the report stated.
The crypto {industry} was rocked final yr by a sequence of bankruptcies at main crypto corporations, together with high U.S. change FTX. Traders had been left with giant losses as token costs slumped and varied companies froze buyer withdrawals.
Whereas the worth of bitcoin has steadily recovered this yr, buyers stay cautious as U.S. regulators have stepped up motion in opposition to what they are saying is an industry-wide tradition of not complying with the legislation.
“The digital belongings area has needed to reckon with short-comings in its elementary operations, together with threat administration, in addition to allegations of company malfeasance,” AIMA Chief Government Jack Inglis stated within the report.
Conventional hedge funds that prevented buying and selling in crypto stated deterrents included reputational threat, a scarcity of clear steerage from regulators and tax authorities and unreliable information.
Greater than half of respondents not but utilizing crypto stated they’d look ahead to additional updates regulating it, the report stated.
Hedge funds which can be invested in crypto largely use bitcoin or ether. Hedge fund methods investing in crypto-assets included multi-strategy (41%), systematic (29%), macro (12%) and fairness (12%).
Virtually half of hedge funds that had been already buying and selling crypto stated they’d put extra money in, however that crypto solely accounted for two% of belongings below administration.
