“Smaller hedge funds tend to be more trade-oriented, seeking alpha in volatile markets. If you’re nimble and quick in such markets, profits can be made. This is what can make these smaller hedge funds attractive. Historically, they’ve been more proactive and active than larger funds.”
“Larger hedge funds, however, show interest but move slower due to two key factors. Firstly, barriers like regulatory burdens or compliance department recommendations, and secondly, the allocation of large funds which makes proving the cost-effectiveness of investments challenging. Nevertheless, we are seeing larger hedge funds entering the market now.”
Lee noted that many investors entering the digital asset space still buy Bitcoin and other cryptocurrencies. “If you’re an asset manager, buying and holding Bitcoin can be quite tricky because many traditional custodians and fund administrators currently lack the capability to handle such assets. Hence, using futures as an alternative to holding cryptocurrencies has become popular,” he said.
“A family office keen not to miss out may go through this process and open accounts with providers like HashKey Group. Some smaller hedge funds may also do so, though typically not the larger funds.”
“However, traditional institutional investors such as university endowments enter this realm by investing directly in private equity projects, token projects, or funds. They do not trade Bitcoin themselves. They look to identify experts in this field and allocate funds for them to manage.”
Lee highlighted that the evolution of blockchain technology provides broader opportunities for acquiring digital assets. “Blockchain applications will bring more assets online, significantly increasing their quantity. The emergence of Digital Currency Electronic Payment (DCEP) technology makes it easier to handle many different assets that will be part of the blockchain. Yes, existing stocks and bonds can move onto the blockchain, but they are already well-served by traditional financing. Many other assets will now come online.”