Crypto hedge funds develop a taste for DeFi


Growing appetite. A PwC report is here to highlight how crypto hedge funds are showing a growing appetite for decentralized finance. Things will only go up from here for the DeFi market.

These organizations managed nearly $3.8 billion in 2020, which is markedly up from the $2 billion that was under management in 2019. And with this rise is an increase in interest in DeFi specific tokens as well as decentralized exchanges (DEXs).

All this has been revealed in a new report released Monday by PwC and the Alternative Investment Management Association (AIMA) — the third annual Global Crypto Hedge Fund Report that is coauthored by Elwood Asset Management.

And it shows that 31% of crypto hedge funds use decentralized exchanges, with Uniswap being the most widely used at 16%, followed by 1inch with 8% and SushiSwap at 4%.

Meanwhile, DeFi specific tokens are also on the rise. LINK was included in 30% of hedge fund investments, while the interoperability protocol Polkadot and lending platform Aave token making up 28% and 27% respectively.

Even some of the more traditional financial institutions are showing an increased interest in DeFi.

PwC Crypto Leader Henri Arslanian said in an email:

“Whilst they may be still far from using decentralized applications, many financial institutions are trying to be more educated and try to understand the potential impact that DeFi may have on the future of financial services.”

And the future may be closer than ever!

The decentralized finance space has seen explosive growth in recent months, with the total value of Ethereum base DeFi platform now sitting at $60 billion according to DeFi Pulse.

To top things off, crypto hedge funds on average returned 128% in 2020, versus 30% in 2019. It is this reason why 47% of traditional hedge fund managers surveyed in this study are already invested or looking to invest in crypto.

Together, they represent $180 billion of asset under management.

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