More Than Half of Hedge Funds Now Hold Crypto as Industry Sees 'Turning Point'

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The institutional embrace of cryptocurrency just crossed a major threshold—and the numbers reveal how quickly Wall Street’s skepticism is evaporating in favor of strategic digital asset exposure.

Over half of global hedge funds now hold some form of crypto-related assets, marking an 8-percentage-point jump from the previous year and signaling that digital currencies have moved from speculative curiosity to portfolio staple, according to the Alternative Investment Management Association and PwC.

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A survey of 122 investors and fund managers—collectively managing around $982 billion in assets—found that 55% of hedge funds maintain crypto exposure, with an average allocation of 7% of their holdings dedicated to the sector. The data was collected during the first six months of 2025.

The Trump Effect on Crypto Adoption

The surge in institutional crypto adoption didn’t happen in a vacuum. Cryptocurrency prices have climbed this year, with Bitcoin hitting multiple record highs fueled largely by President Donald Trump’s pro-industry stance and his administration’s push for crypto-friendly regulations.

“The past year has marked a turning point for US crypto regulation,” the report said. “The U.S. may finally be laying the groundwork for long-term regulatory stability.”

Regulatory clarity appears to be breaking down traditional barriers to institutional participation. While exposure is growing, the investments remain relatively conservative—more than half of hedge funds with crypto positions are allocating less than 2% of their assets to digital currencies.

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How Hedge Funds Are Actually Playing the Crypto Game

The mechanics of institutional crypto investment reveal a preference for controlled exposure over direct ownership. A majority of funds—67%—are investing through crypto derivatives, financial instruments that allow them to take positions on cryptocurrency price movements without holding the underlying assets.

This derivative-heavy approach offers flexibility but introduces its own risks. The report cited an October flash crash that “exposed vulnerabilities related to excessive leverage and a lack of institutional-grade infrastructure” in crypto markets.

Despite these concerns, funds already invested in digital assets are planning to increase their exposure. Those with existing crypto positions indicated they intend to purchase more within the next 12 months.

The timing coincides with broader hedge fund industry growth. Capital flowing into hedge funds reached a record high of nearly $5 trillion in Q3, providing additional firepower for managers looking to expand their digital asset strategies.

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The Stability Question That Still Looms

Regulators worldwide have warned about risks to financial stability as crypto becomes increasingly intertwined with mainstream finance. The growing institutional adoption documented in the AIMA and PwC report underscores why these warnings matter—when half of all hedge funds hold crypto exposure, disruptions in digital asset markets can ripple through traditional finance faster than ever before.

For investors watching this institutional migration, the message is clear: cryptocurrency has evolved from fringe speculation to a legitimate asset class commanding serious capital allocation from sophisticated money managers. Whether that evolution brings stability or amplifies risk remains the trillion-dollar question.

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This article More Than Half of Hedge Funds Now Hold Crypto as Industry Sees 'Turning Point' originally appeared on Benzinga.com