Key Insights:
47% of hedge funds in the PwC survey have already invested in crypto or crypto-derived products.
Among hedge funds, derivatives have seen the highest growth, while spot trading saw a decline.
An overwhelming two-thirds of them seek to either maintain or increase their investments.
Besides hedge funds, several other institutions have been investing in cryptocurrencies, including listed corporates like MicroStrategy and Metaplanet.
Research by Pricewaterhouse Coopers, one of the big four accounting firms, revealed that hedge funds increasingly invest in crypto. In 2024, 47% of all hedge funds were invested in some cryptocurrency. This figure rose from 29% in 2023, showing a phenomenal 62% rise.
Among those who are already invested, two-thirds (65%) were confident of increasing their investments or at least holding their commitments for the long term. Some well-known hedge funds active in crypto are Pantera Capital, Morgan Creek Digital, BH Digital, Wave Digital, Off The Chain Capital, and BlockTower Capital.
Further, most hedge funds prefer derivatives, which increased from 38% in 2023 to 58% in 2024. Amid all these, spot trading declined from 69% to 25%. The probable reason for that seems to be the leverage that derivatives provide.
Hedge Funds are less regulated than pension funds or mutual funds. They have a much larger risk-taking capacity and offer much higher returns than others.
Among well-known institutional players in this field, a few are Metaplanet (Japan), MicroStrategy (USA), JP Morgan (USA), and several crypto ETF issuers like Ark Invest, BlackRock, Fidelity, Grayscale, and others.
The list of institutional investors in crypto even includes players who have traditionally invested in safer assets. These players include pension funds like the Michigan State Pension Fund (USA), which invested $10 million, and an unnamed U.K.-based pension fund, which invested more than 3% of its value via Cartwright.
Be it ETFs, pension funds, or even those buying MSTR shares to invest in crypto, Bitcoin is the first choice of institutions when they enter this field.
This is because Bitcoin, often nicknamed "digital gold," is a well-known asset, dominates around 56% of the crypto market cap, has a very secure blockchain, is highly liquid, and is also one of the most stable cryptocurrencies.
The popularity of Bitcoin as an investment choice among institutions can be judged from the fact that despite being less than 10 months old, the Bitcoin ETFs market is about to reach $100 billion in early 2025 (currently at $70 billion).
Ethereum is popular among institutions because of its central role in DeFi, a market that is seen as the evolution of traditional finance. Institutional interest in Ethereum could be seen from the recent launch of three money market funds with tokenized (dollar-pegged) trading units by BlackRock, UBS, and Fidelity, all of which were launched on Ethereum.
Earlier, the launch of Ethereum ETFs marked a similar euphoria for institutions. However, Ethereum's price dismissed all that enthusiasm.
However, as the market progresses, we could see a revival in ETH ETFs, most probably after Ethereum finishes all its scheduled upgrades. These upgrades make Ethereum faster, more decentralized, and easier to secure.
With 21Shares's application, the XRP ETF journey has already started. Ripple CEO Brad Garlinghouse has previously called an XRP ETF as something inevitable.
XRP ETFs could receive far more attention from hedge funds than other funds because of the relative ease of their regulations, allowing them to speculate on traditionally considered risky assets.
After Bitcoin and Ethereum, Solana is the next candidate for an ETF. Five ETF, ETP, and ETN players have already applied for various Solana-based investment products.
21Shares Solana Staking ETP
CoinShares Physical Staked Solana (ETP)
VanEck Solana ETN
WisdomTree Physical Solana (ETF)
ETC Group Physical Solana (ETF)
These investment products might see huge traction in crypto markets because of the attention that Solana already receives. These products would allow retail investors to invest in SOL and SOL-derived products that have already delivered hundreds of percent in return this year.
Dogecoin has been a major investment choice for institutions because of its leadership in the best-performing crypto sector this year i.e., among memecoins.
Grayscale has already put DOGE on the list of potential investments, which indicates we might see a DOGE ETF soon. The company was one of the earliest ETF issuers to invest in Bitcoin and Ethereum, and despite severe outflows, it is still the largest player in both ETF markets.
Disclaimer: Voice of Crypto aims to deliver accurate and up-to-date information, but it will not be responsible for any missing facts or inaccurate information. Cryptocurrencies are highly volatile financial assets, so research and make your own financial decisions.