After a complex relationship with the crypto world that moved from disregard to outright hostility, the traditional hedge funds are willing to embrace cryptocurrencies. In a survey by Intertrust Group, a global fund administrator has established that international hedge funds have plans to increase their Bitcoin and crypto exposure in the next five years.
Intertrust surveyed Chief Financial Officers (CFOs) from 100 reputable hedge funds on their intention to purchase crypto assets. Around 98% of the respondents expect their hedge funds to have 7.2% of their assets invested in cryptos by 2026.
The CFOs polled currently have an average asset base of $7.2 billion under their management. Converting 7.2% of this to crypto assets would mean a massive shift and more money pumped to the crypto world. Still, among the respondents, more than 17% forecast to have 10.6% of their assets in the form of crypto like Bitcoin (BTC) within these five years.
As the hedge funds prepare to embrace the crypto assets, they are working on the systems to ensure investor confidence. In addition, they are putting controls in place to ensure the investors are comfortable.
The current state of Hedge funds and Bitcoin
If the recent happenings in the financial sector were anything to go by, institutions looking to hold a crypto hedge fund should not be a surprise. The move follows years of sustained top performance by the crypto assets as the traditional stocks suffered due to the coronavirus effects.
From the first quarter of 2020, the traditional stocks have struggled. Most of them declined as the traditional economy came to a halt following the coronavirus pandemic. However, in the opposite move, Bitcoin and other cryptocurrencies have had some of the best runs.
Bitcoin has rallied from the lows of $3,000 in April 2020 to hit over $63,000 by mid-2021. These are some of the best performances ever by an asset. While the crypto market has currently corrected Bitcoin trading at around $33,000, it retains top value.
The crypto market movements set Bitcoin as an alternative to gold in its role as a safe haven. Investors can rely on it for safety when the other assets take a hit. This has seen an influx in institutional investors embracing Bitcoin. An earlier survey established that over 36% of American and European institutional investors own crypto assets. These institutions include financial advisors, high net-worth individuals, venture and crypto hedge funds, and traditional hedge funds. The institutional investments surpassed the ordinary investments on Bitcoin within the period of the crypto surge.
The much uptake of Bitcoin by institutions can be due to the ease of buying Bitcoin. It has never been easier to buy and trade cryptocurrencies with the several crypto exchanges and asset formats. Moreover, you don’t have to own Bitcoin if unsure; you can opt for the more secure Bitcoin futures.
As companies face the uncertainty of the economy for the future, holding a crypto asset hedge fund provides a safety net. Whatever happens to the traditional stocks, the hedge funds can rely on the crypto assets for backup.