According to a new survey, traditional hedge funds are eager to grow their exposure to Bitcoin and other cryptocurrency markets over the next five years.
The chief financial officers of 100 hedge funds throughout the world were asked by Intertrust Global, an international trust and corporate management firm, regarding their intentions to buy crypto-assets. By 2026, 98 percent of them estimate their hedge funds to have invested 7.2 percent of their assets in cryptocurrencies.
According to the poll, a 7.2 percent investment in the cryptocurrency sector would equal $312 billion if reproduced across the entire industry. Meanwhile, roughly 17% of the CFOs asked admitted that 10% of their hedge fund’s assets may be devoted to cryptocurrencies like Bitcoin (BTC).
After soaring from $3,858 in March 2020 to over $65,000 in April 2021, the results appeared, prompting suspicion that it might crash even more owing to overvaluation.
Despite this, the flagship cryptocurrency held technical supports around $30,000 and soared back above $40,000 earlier this week.
Recap of the Bitcoin price surge
The majority of Bitcoin’s gains came as a result of anti-inflation narratives that grew popular in the aftermath of the worldwide market crisis caused by the coronavirus outbreak in March 2020.
The US Federal Reserve responded with massive monetary support, introducing a near-zero lending rate policy and a $120 billion monthly asset purchase programme.
The central bank’s move sent US government bond yields to new lows. Meanwhile, liquidity infusions into the economy, aided by trillions of dollars in stimulus aid from the White House, have pushed the dollar’s value lower against its main rival fiat currencies.
Many investors flocked to riskier safe-haven assets such as U.S. stocks, gold, silver, and Bitcoin, which boosted U.S. stocks, gold, silver, and Bitcoin. As the Fed’s money-printing practises continued, Bitcoin had the best bull runs of them.
Many mainstream fund managers seem to be at the front of Bitcoin’s price surge in 2020. For example, hedge firm Tudor Investment Corporation’s billionaire investor Paul Tudor Jones said last year that he owns minor amounts of Bitcoin. Later, famed investor Stan Druckenmiller disclosed that he has invested in the benchmark cryptocurrency to protect against inflation.
Brevan Howard, a European hedge fund management firm, and SkyBridge Capital, Fidelity Investments, and ARK Invest, all of which are based in the United States, have become some of the most prominent Bitcoin advocates from the traditional finance industry.
According to Intertrust’s poll, every surveyed executive in Europe, North America, and the United Kingdom has at least 1% exposure to Bitcoin and other cryptocurrencies. It went on to say that hedge funds in North America will likely have a 10.6 percent average exposure to cryptocurrencies, compared to 6.8 percent in the UK and Europe.
Inflation is a pain.
The Intertrust study was conducted as US inflation hit 5% in May for the first time since 1992, according to the US Labor Department’s monthly Consumer Price Index (CPI) report.
Many commentators, like Randall Kroszner, a former Fed governor and professor at the University of Chicago business school, believe that greater inflation will force the Fed to scale down its expansionary policies. As the Federal Open Market Committee (FOMC) opened its two-day meeting on Tuesday, concerns of “tapering” increased.
However, a majority of FOMC members, including Fed Chair Jerome Powell, have dismissed the latest CPI increase as “transitory.” According to ANZ economist Tom Kenny, the US Federal Reserve would maintain its policies intact at least until the labour market improves.
Meanwhile, after witnessing the Fed’s displeasure of recent inflation rises, Paul Tudor Jones claimed in a recent interview with CNBC that he has upped his Bitcoin holdings from 1% to 2% in 2020 to 5%. He added:
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