Digital Asset Hedge Funds Surge from $2B in 2019 to $3.8B in 2020, with 184% Increase in Median Performance: Report

During 2020, crypto-asset hedge funds almost doubled to reach an all-time record as the nascent industry continued to deliver a solid overall performance.

As part of the recent Bitcoin (BTC), Ethereum (ETH), and wider digital currency market bull run, total assets under management (AUM) of crypto hedge funds increased from a little over $2 billion in 2019, to over $3.8 billion last year, according to Big Four auditing firm PricewaterhouseCoopers’ (PwC) 3rd Annual Global Crypto Hedge Fund Report 2021.

PwC’s report, which covers the results of survey-based research performed during Q1 2021 by Elwood Asset Management, while combining qualitative inputs from PwC’s crypto division, reveals that there was a median performance of 184% last year (considerably greater than 2019 at 17%).

Virtual currencies have had an unprecedented year with their combined market cap increasing 132% since the start of 2021. The digital asset market bull run, which started around September 2020, drove the BTC price to an all-time high of more than $64,800 (but the leading crypto and the rest of the market have now gone through a major correction).

In April 2021, however, the combined market cap of the crypto market surpassed the $2 trillion mark for the first time ever. Altcoins or digital currencies other than BTC were responsible for leading most of the rally.

While carefully examining the latest digital asset hedge funds data, the effect of the 2020-2021 crypto bull market is quite apparent, the PwC report reveals, adding that the percentage or proportion of funds managing larger amounts of assets was significantly greater during 2020, when compared to 2019.

Last year, the percentage of crypto-asset hedge funds with AUM of more than $20 million surged from 35% in 2019 to just over 45%. Meanwhile, the number of funds with relatively smaller AUMs fell from over 80% in 2019 to around 55% last year.

The average AUM for 2021’s surveyed funds surged from $12.8 million in 2019 to approximately $42.8 million in 2020, meanwhile, the median AUM surged from $3.8 million to $15.0 million.

PwC’s survey results suggest that there’s been steady adoption of decentralized finance (DeFi) protocols by crypto-asset hedge funds with just over 30% of surveyed firms now using decentralized or non-custodial exchanges (DEXs). Uniswap was the most widely used DEX (15.7%), followed by 1inch (7.9%) and SushiSwap (4.5%)

Digital asset hedge funds were also asked about how they expect the crypto market to perform in the future.

Results from the survey indicate that asset managers are still quite bullish, with most of them (65%) predicting or forecasting that the BTC price will be somewhere in the $50,000 to $100,000 range. Around 21% think that the Bitcoin price will be anywhere between $100,000 and $150,000 by the end of the year.

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