Hedge Funds See the Crypto Market Decline as an Investment Opportunity

Hedge funds appear unfazed by the recent crypto market downturn, adjusting cash positions and proposing new investment offerings.

Although the market value of cryptocurrencies has dropped by more than 40% since its peak of $2.5 trillion in early May, institutional investors continue to pour money into the space. Despite the fact that Bitcoin (BTC) has lost more than half of its US dollar value and altcoins have lost about 70% of their value, big-money investors such as hedge funds are still investing in digital currencies.

Crypto Market Decline

Institutional investors are expanding their footprint in the crypto and blockchain area, from direct exposure to crypto to financing startups developing digital asset products and services. In June, a poll of 100 chief financial officers from hedge funds around the world found that hedge funds aim to increase their crypto exposure in the next five years.

Crypto regulations appear to be taking shape in many jurisdictions as regulated firms continue to examine digital currency investment alternatives. Meanwhile, regulators in the United States, like as the Securities and Exchange Commission (SEC), are under increasing pressure to adopt a tougher legal framework for cryptocurrency.

More crypto regulation is welcomed by big-money players.

Asset managers are unconcerned about regulatory issues, according to stakeholders, as more institutional participants enter the crypto space. Indeed, financial authorities appear to be concentrating their efforts on protecting retail investors.

Meanwhile, regulatory organisations appear to be issuing explicit directions to banks and other regulated entities on how to behave with digital assets.

Cornell University professor and Avalanche founder Emin Gün Sirer told Cointelegraph that the recent market collapse had done little to discourage institutional investors’ excitement for crypto exposure. The legitimacy of crypto as an asset class, according to Sirer, is “beyond dispute,” as he explains: “I’ve been getting contacts from retirement funds, not hedge funds, but retirement funds.” A very different piece, far slower-moving, but with perhaps ten times more funds under their control, they are gradually moving into crypto.”

If hedge funds and other institutional investors see the present crypto collapse as a premium investing opportunity, such a strategy will almost certainly be based on the anticipation of a future market rebound. Sirer has projected that sideways accumulation will dominate crypto price activity during the summer months, as previously reported by Cointelegraph.

Indeed, since plunging by more than 50%, Bitcoin has been stuck in a price range between $32,000 and $36,000. The lack of a substantial breakout in either direction for Bitcoin has nearly forced the crypto market to repeat mini-dips and pumps.

In Q4, Sirer, on the other hand, predicts a return to the upward parabolic price trajectory. The projected recovery, according to the Avalanche founder, should begin in October or November.

Firms like NYDIG claim that U.S. banks are eager to get in on the action and begin selling Bitcoin trading services to account holders after seeing millions of dollars go into the coffers of exchanges like Coinbase on a daily basis. As a result, the company has announced a series of collaborations that will allow customers in the United States to trade cryptocurrency directly from their bank accounts.

“We might see a return in 2021, yes, but parabolic gains may not be seen until December or early next year,” BitBull’s DiPasquale said, adding, “We could see a return in 2021, yes, but parabolic gains may not be seen until December or early next year.” DiPasquale, on the other hand, predicts that Bitcoin will end the year with a price exceeding $50,000.