- The Crypto Hedge Funds have gotten to $3.8 billion in 2020, which was up from $2 billion the year prior, 2009, which was an increase of 90%.
- PwC and AIMA have reported that these funds are showing an increased interest for decentralized finance (DeFi)
- 31% across all crypto hedge funds use decentralized exchanges (DEXs)
The latest cooperation report, conducted by PwC alongside the Alternative Investment Management Association (AIMA) has shown that the assets that are assets under management (AuM), which by itself is managed by cryptocurrency hedge funds, have increased from $2 billion in 2019 to $3.8 billion in 2020. This means that a lot of people as well as hedge funds have an increased preference in regard to Decentralized Finance (DeFi).
When we look at the data from DeFi Pulse, the DeFi field has managed to grow exponentially, specifically throughout the previous few months. To be more specific, in May, the total value locked actually managed to reach its peak of $88.005 billion.
There has recently been a panic throughout the crypto industry, due to severe volatility, and as such, the total value locked fell to $52.252 billion. When we compare this to the levels this was at in 2020 though, where it peaked at $20 billion, this increase is a big amount nonetheless. The increase from $20 billion to $88.0005 billion was at 340.03%, while the decrease to $52.252 billion still puts the growth by 161.26% when compared to 2020.
Going even further, the third annual global crypto hedge fund report, which was co-authored by Elwood Asset Management, was released on Monday and it showcased that currencies such as Bitcoin and Ethereum are still some of the most popular options when it comes to crypto hedge funds. In fact, 92% of crypto hedge funds use Bitcoin (BTC) for trading, while Ethereum (ETH) was included in 67% across their investments.
You also have DeFi- specific tokens, and these include:
Regarding further statistics, 31% of the crypto hedge funds used decentralized exchanges (DEXs) out of which Uniswap was the most widely used one at 16, with 1inch being at second place with 8% and SushiSwap being at third place with 4%.
That being the case, more than half of the crypto hedge funds stated that they would trade digital currency derivatives. Cryptocurrency mortgages were at 42% while lending was at 33% and borrowing was at 24%.
Diving deeper into the report, a quarter of the hedge fund managers, that do not invest in digital assets, confirmed that they are prepared to invest in late-stage or are looking to invest in cryptocurrencies. The exact percentage here was 26%.
This being the case, we can clearly see that they are concerned about the regulatory risk of cryptocurrencies as well as client reaction and reputational risk. 64% of the respondents claimed that they do not have a sufficient understanding of how digital assets worked as a whole, and they will increase their willingness to participate within this world of virtual currency investments if the previously mentioned, major obstacles are removed.
Another thing to note is that crypto hedge funds, on average, returned 128% in 2020, when compared to 2019’s 30%. The majority of investors in these funds are either individuals with a high net-worth (54%) or family offices (30%). The percentage of crypto hedge funds with over $20 million in AUM increased in 2020 from 35% to 46%.