The current market price of cryptocurrencies may have dropped from its all-time high earlier this year. However, they remain an attractive asset class for hedge fund managers, according to a recent survey commissioned by digital asset management firm Nickel Digital.
Hedge funds are investment funds that focus primarily on high-risk, high-return investments. Unlike traditional funds that invest for stable yields and growth, hedge funds attempt to take calculated risks with the goal of returning even higher profits.
The survey by Nickel Digital reportedly includes fund managers that have a combined $66.5 billion worth of assets under management (AUM). Three-quarters of the surveyed funds said they would increase their exposure to cryptocurrencies between now and 2023.
Six out of the 23 respondents were more risk-averse funds, revealing that they plan to "dramatically" increase their exposure to the crypto market. Their primary reason for choosing to invest in crypto over other asset classes is that crypto provides a greater opportunity for capital appreciation.
In the past, many institutional investors have cited regulatory uncertainty around crypto assets as a reason for not getting involved. However, an improved regulatory landscape has resulted in almost half of the respondents to Nickel Digital's survey saying that they are now more confident to invest.
Regarding factors that could be improved to make the crypto market more attractive for big players, three-quarters of respondents mentioned illiquid markets and a lack of transparency around low cap projects in the crypto space.
Nickel Digital CEO, Anatoly Chrachilov, commenting on the survey findings, said it confirms that "there is an ever-increasing appetite for this asset class among professional investors, willing to take constructive longer-term view on this asset class.”
Nickel Digital's crypto fund for its part has had a stellar year with a 12.6% increase in the first half of the year and despite the harsh market correction in April.
In recent weeks, though, the crypto market has rebounded and looks on track to set new highs before the end of the year. The leading cryptocurrency, Bitcoin, is trading at £35,700 (over $50,000) at the time of writing, with the global market cap around £1.58T ($2.1 trillion).