PwC Report: Boom Time For DeFi Sector As Crypto Hedge Funds Show Growing Interest
A newly released report by PricewaterhouseCoopers (PwC) and Alternative Investment Management Association (AIMA) has shown that hedge funds' interest in decentralized finance (DeFi) is growing.
The research titled the 2020 Global Crypto Hedge Fund Report was conducted in Q1 2020, polling responses from the world's largest global crypto hedge funds by assets under management (AUM). It specifically focused on funds that invest and trade in cryptocurrencies.
Chainlink, Polkadot, Aave Lead Altcoins In Survey
The report indicated that Chainlink (LINK), Polkadot (DOT), and Aave tokens had grown in popularity as they were in the top five cryptocurrencies hedge funds were investing in.
While the report showed Bitcoin leading as the most popular asset among funds, Ethereum and Litecoin followed suit, featuring 67% and 34% respectively of all crypto hedge funds surveyed. DeFi tokens Chainlink and Polkadot closed up the top five crypto assets with 30% and 28%, respectively, while Aave came at number five with 27%.
The research also noted that some altcoins were more popular than their market capitalizations would suggest. The research reads,
“Among the top 15 traded altcoins, some of them are considerably more popular than their market capitalization would suggest. Litecoin and Chainlink are the second and third most traded altcoins, but their market capitalizations are far lower than Polkadot and Cardano, which fare lower in the trading ranks.”
Also shocking was the discovery that almost 31% of crypto hedge funds use decentralized exchanges (DEXs), according to the report. With Uniswap being the most widely used DEX (16%), followed by 1inch (8%) and SushiSwap (4%).
According to PwC, the total number of assets under management of crypto hedge funds globally doubled in 2020, climbing from $2 billion in 2019 to $3.8 billion.
Crypto hedge funds were also found to be actively involved in staking, lending, and borrowing activities.
Crypto Hedge Funds Push Bitcoin Price By Buying The Dip
According to reports, Crypto hedge funds bought the dip as they saw the crypto market crash as a chance to buy Bitcoin for less.
This was after former Morgan Stanley Trader, Felix Dian encouraged hedge funds to buy the dip, suggesting that this was why they were in the digital currency market.
Professional investors also treated the Bitcoin crash as an opportunity to buy Bitcoin at a discount. Institutions reportedly bought 34,000 Bitcoin on Tuesday and Wednesday last week after selling as much as 51,000 Bitcoin over the previous two weeks.
The buyer pressure was said to have impacted Bitcoin’s price positively by briefly pushing it up to $42.172 before it later dropped to $36,808, following the news of China's crypto crackdown.
Meanwhile, in recent times banks have launched several cryptocurrency offerings. The latest move was made by investment bank Cowen which partnered with blockchain technology provider PolySign earlier this month to provide qualified institutional clients access to cryptocurrencies.