A recent study indicates that traditional hedge funds have started gaining interest in the world of cryptocurrencies. However, they’re keeping their investments low, notwithstanding the current crypto surge sweeping the market. Intertrust Group, a Netherlands-based fund administrator, in its survey of 100 hedge funds, found that hedge funds are aiming to scale their crypto exposure significantly. Chief financial officers worldwide predicted that 7.2% of their assets would be held in cryptocurrencies in the next five years. In order of priority, the primary reasons for interest in the crypto space given by traditional hedge funds were: general diversification, exposure to a new value-creation ecosystem, and hedge against inflation. Strategies by Traditional Funds Investing in Cryptocurrencies Traditional hedge funds investing in cryptocurrencies use fundamental trading, passive approach, and arbitrage as investment strategies. They also use Bitcoin and other cryptos for staking, lending, and borrowing. An increased number of players and liquidity is evolving the crypto derivatives market. Different exchanges provide highly sophisticated products that allow crypto hedge funds to capitalize on mispricing and arbitrage opportunities. In bull markets, managers compound returns by increasing leverage and taking more extensive exposure to their underlying positions. Hedge funds invest in digital assets through derivatives trading (fu...
