A new survey by the Alternative Investment Management Association and PwC highlights the increasing interest of traditional hedge funds in cryptocurrencies, driven by regulatory clarity and the launch of the Bitcoin spot ETF.

Growth in Digital Asset Investments

According to the report, 33% of funds plan to boost their investment by the end of Q4 2024, while 67% intend to maintain their position. Most hedge funds debuted digital assets with spot trading of tokens, but 58% altered their trading strategy in 2024.

Regulatory Challenges in Adoption

Regulatory uncertainty has been a significant fear factor for traditional finance giants in exploring the cryptocurrency sector. However, regulators in some nations have taken a cooperative approach with favorable rules and regulations.

Impact of Penalties and Regulations on the Market

In 2024, the U.S. Securities and Exchange Commission (SEC) imposed nearly $4.7 billion worth of penalties against crypto firms and executives, a more than 3,000% increase from the previous year. The heaviest fine was imposed on TerraForm Labs and its founder, Do Kwon.

The penetration of digital assets has reinforced the presence of cryptocurrencies in the portfolios of traditional hedge funds, despite regulatory challenges.