Crypto hedge funds interest in DeFi is growing

Hedge funds are showing increasing interest in cryptocurrencies, particularly the DeFi (Decentralized Finance) sector. Analysts of the consulting company, PricewaterhouseCoopers (PwC) and Alternative Investment Management Association (AIMA) also affirm that hedge funds’ interest in decentralized finance (DeFi) is growing. The total volume of assets under the cryptocurrency hedge funds management increased from $1 billion to over $2 billion in 2019 and 3.8 billion in 2020.

Furthermore, the recently released Global Crypto Hedge Fund Report indicates that 31% of these funds utilize decentralized exchanges. Interestingly, Uniswap (UNI), 1inch (1INCH) and SushiSwap (SUSHI) are indicated as the most widely used assets.

It is also worth noting that some DeFi cryptocurrencies are getting wide adoption. They include Chainlink’s LINK, which was included in 30% of hedge fund investment, Polkadot’s DOT, which accounted for 28% of hedge fund investment and AAVE with 27%.

According to DeFi Pulse, the total value locked in Ethereum-based DeFi networks sits at $60 billion. At the same time, traditional hedge funds like Point72 are also showing interest in DeFi as part of setting up a crypto-focused funds strategy.

Some more traditional financial institutions are also interested in DeFi. PwC Crypto Leader, Henri Arslanian, stated, “Whilst they may be still far from using decentralized applications, many financial institutions are trying to be more educated and to understand the potential impact that DeFi may have on the future of financial services.”

Although Bitcoin is not the most popular crypto among hedge funds interests, Ethereum’s ETH was included in 67% of investments. Also, crypto hedge funds are involved in crypto staking, lending, and borrowing.

Crypto hedge funds made 128% in 2020 versus 30% in 2019. The majority of investors of such funds are high-net-worth individuals (HNI’s) or family offices. After a survey, 47% of traditional hedge fund managers studied are already invested or thinking of investing in cryptocurrencies.


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