Interest in crypto investing continues to grow as Congress announced the formation of a cryptocurrency working group on Feb. 4, following former President Donald Trump’s executive order last month, according to Reuters.
Asset managers at all other levels are also testing the waters of crypto investing as the U.S. government increases efforts to integrate digital assets into the existing financial system.
A bill proposed today in North Carolina, the NC Digital Assets Investments Act, would authorize the state treasurer to purchase certain virtual currencies, primarily Bitcoin, as part of managing state investment pools, including the Highway Fund and the Teachers’ and State Employees’ Retirement System. Under the legislation, digital assets could comprise up to 10% of any fund.
Major institutional players are expanding their stakes in crypto. Hedge funds were early adopters, and now U.S. endowments and foundations are joining the rush, drawn by potential upside risk.
“We don’t have a crystal ball on what cryptocurrencies will become in 10 years,” Chun Lai, chief investment officer of the $4.8 billion Rockefeller Foundation, told the Financial Times. “We don’t want to be left behind when their potential materializes dramatically.”
A 2023 EY report predicted institutional interest in digital assets would continue to grow. “Most institutional investors believe in the long-term value of blockchain and crypto/digital assets and plan to scale digital asset investments over the next two to three years,” the report said, “Investors are also interested in tokenized financial assets, and institutions are actively exploring tokenizing their own assets.”
Even in 2023, hedge funds were an outlier in crypto adoption. “Given their risk-on nature, hedge funds are a notable exception, with 36% of respondents allocating more than 5% of their portfolios to the asset class,” the EY report found.
Among hedge funds trading in traditional markets, 47% had exposure to digital assets in 2024, up from 29% in 2023 and 37% in 2022, according to the Global Crypto Hedge Fund Report, published in October 2024 by the Alternative Investment Management Association and PwC. Among those already invested, 67% planned to maintain their current level of crypto investments, while the rest planned to increase exposure by the end of 2024, the survey found.
Elliott Investment Management, a roughly $70 billion fund, likened the trend to a crowd of sports bettors, writing in a Jan. 31 letter to clients that it “has never seen a market like this,” according to the Financial Times, which reviewed the document.
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