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Hedge Funds Pile Into Crypto As Institutions Question Bitcoin’s Value

Hedge Funds Pile Into Crypto As Institutions Question Bitcoin’s Value

Bitcoin's Value

Hedge Funds Pile Into Crypto As Institutions Question Bitcoin's Value. Photo by: STRF/STAR MAX/IPx 2021 2/23/21

The viability of Bitcoin’s value continues to be a question for investors, however, that hasn’t stopped the number of crypto hedge funds from growing. According to a report form PricewaterhouseCoopers (PwC) crypto hedge fund assets doubles in 2020 from $2 billion the prior year (2019) to $3.8 billion.

Of that number, more than 90 percent trade in Bitcoin, Decrypt reported. A report from Financial News added that the same percentage want to increase their investments in the crypto market.

After Bitcoin, the highest-ranking crypto assets in hedge funds are Ethereum at 67 percent, Litecoin at 34 percent, Chainlink at 30 percent and Polkadot at 28 percent. Investment in crypto hedge funds began around 2018 after the price leaped, according to PwC’s report.

“The price spike in 2018 appears to have been a catalyst for further crypto funds to launch while the decrease in 2018 led to fewer funds being launched in 2019,” the report said, adding, “18% of the survey respondents were launched in 2020 when prices were rising again.”

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Today’s crypto hedge funds collectively hold $20 billion in assets, with an average of $42.8 million assets under management (AUM)according to Financial News. This is despite recent drops in Bitcoin’s value and that of many other cryptocurrencies.

However, with banks like Morgan Stanley and Goldman Sachs announcing plans to give their clients access to the crypto market, optimists are hopeful value will once again increase.

Traditional hedge funds have a collective $180 billion in AUM and more of them are expected to invest in crypto. “We expect inflows into crypto hedge funds to continue to increase over the coming months as more and more institutional investors decide to allocate to this fast growing space,” PwC’s crypto leader Henri Arslanian said.

Not everyone is happy about crypto hedge funds and banks who are getting involved in the market. Twitter user @Joshuajammes is among those who are not fans of it.

“I have a huge problem with banks & hedge funds being apart (sic) of cryptocurrency,” @Joshuajammes wrote. “Ever since they got involved it’s been a shit show of highly volatile, unstable manipulation of coins. They are decimating the worth & appeal of crypto. Banks & hedge funds are ruining crypto.”