How To Start A Crypto Hedge Fund: 9 Handy Steps to Thrive

Starting a crypto hedge fund seems like a complex puzzle that leaves many aspiring fund managers scratching their heads. Crypto hedge funds now control nearly 2% of all hedge fund assets under management, showing real growth in this digital asset space.

This guide breaks down how to start a crypto hedge fund into nine clear steps that cover everything from market research to attracting investors. Ready to turn your crypto expertise into a thriving investment business?

Understanding Crypto Hedge Funds

Crypto hedge funds operate like traditional investment funds, but they focus exclusively on digital assets and cryptocurrencies. These specialized funds use various strategies — from long/short equity positions to high frequency trading algorithms — to generate returns for institutional investors and high-net-worth individuals.

What is a Crypto Hedge Fund?

A crypto hedge fund operates as an investment vehicle that focuses on digital assets like Bitcoin and Ethereum. These funds trade decentralized digital currencies and their derivatives, including futures contracts, options, and perpetual contracts.

Fund managers use sophisticated strategies to generate returns for their investors while managing risk across various crypto assets. Unlike traditional investment funds that focus on stocks and bonds, crypto hedge funds specialize in the volatile world of cryptocurrencies and blockchain-based financial instruments.

These investment products employ multiple strategies to capture profits from digital markets. Market neutral approaches help minimize risk while seeking steady returns. Quant strategies use trading algorithms and statistical methods to identify profitable opportunities across decentralized exchanges.

Some funds take a venture capital-style approach, investing directly in promising blockchain start-ups and crypto projects. Many institutional investors now view crypto hedge funds as legitimate alternative investments that can diversify their portfolios beyond traditional asset classes.

Crypto solutions for hedge funds have evolved significantly, offering sophisticated tools for portfolio management and risk assessment.

The crypto hedge fund space has matured dramatically, with institutional-grade infrastructure now supporting complex trading strategies that were impossible just a few years ago.

How Do Crypto Hedge Funds Differ from Traditional Hedge Funds?

Crypto hedge funds operate in a completely different asset class compared to traditional hedge funds. Traditional hedge funds focus on stocks, bonds, and other established financial instruments, while crypto hedge funds specialize in digital assets like Bitcoin, Ethereum, and other cryptocurrencies.

These funds also trade tokenized derivatives and perpetual futures, which don’t exist in traditional finance. The underlying assets in crypto funds are highly volatile and trade 24/7, unlike stock exchanges that close at specific times.

Crypto hedge funds often use decentralised exchanges for trading, giving them access to markets that traditional funds can’t reach.

The structure and operations of crypto hedge funds differ significantly from their traditional counterparts. As of mid-2024, crypto hedge funds represent only 2% of total hedge fund assets under management and 2% of global liquid assets.

Many crypto funds locate themselves in tax havens like the Cayman Islands, Gibraltar, or British Virgin Islands, with only 16% based in the United States. Management fees typically range from 1.5% to 2.0%, while performance fees span 15% to 20%.

Fund managers in the crypto space must understand blockchain technology, smart contracts, and digital asset custody, skills that traditional hedge fund managers rarely need. The regulatory environment for crypto funds remains less developed, creating both opportunities and risks that don’t exist in traditional financial markets.

Key Steps to Start a Crypto Hedge Fund

Starting a crypto hedge fund requires careful planning and strategic execution across multiple critical areas. These foundational steps will determine whether your fund attracts institutional investors and achieves long-term success in the digital assets market.

How Do You Conduct Market Research for a Crypto Hedge Fund?

Market research forms the backbone of any successful crypto hedge fund strategy. Digital assets present unique opportunities that traditional hedge funds often miss, especially in inefficient markets where arbitrage opportunities thrive.

1. Analyze cryptocurrency price patterns across multiple exchanges to identify arbitrage opportunities that institutional investors frequently overlook in these inefficient markets.
2. Study correlation data between digital assets and traditional equities to understand how cryptocurrencies behave independently from broader market movements.
3. Research venture capital firms like Coinbase Ventures and Blockchain Capital to understand their investment thesis and portfolio allocation strategies.
4. Examine trading volumes and liquidity patterns across different crypto exchanges to spot potential market making opportunities for your fund.
5. Track regulatory developments from the Securities and Exchange Commission that could impact digital currency group operations and compliance requirements.
6. Monitor decentralised finance protocols and their yield opportunities, as these markets often present inefficiencies that quant strategies can exploit effectively.
7. Investigate options market data for major cryptocurrencies to understand how put options and derivatives trading affects overall asset allocation decisions.
8. Study successful crypto hedge funds’ public disclosures to learn about their quant funds approaches and risk management techniques.
9. Analyze exchange-traded funds and index funds that include digital assets to understand institutional investor sentiment and market trends.

Once you complete your market research, you’ll need to translate these findings into a concrete investment strategy that sets your fund apart.

How Do You Define an Investment Strategy for Crypto Funds?

Defining your investment strategy sets the foundation for your crypto hedge fund’s success. This decision shapes every trade, risk assessment, and performance metric you’ll track.

1. Choose between long/short equity strategies using digital assets – Focus on tokens with strong fundamentals while shorting overvalued cryptocurrencies. This approach mirrors traditional hedge funds but applies to blockchain-based securities and tokens.
2. Develop market neutral strategies to minimize directional risk – Pair long positions in undervalued crypto assets with short positions in overvalued ones. Actively managed crypto strategies often outperform passive buy-and-hold approaches, especially during market downturns.
3. Build systematic trend and momentum strategies using quant methods – Create algorithms that identify price patterns and trading signals across multiple exchanges. These automated systems can execute trades faster than manual approaches.
4. Target institutional investors with proven risk management frameworks – Design strategies that appeal to pension funds, endowments, and family offices seeking crypto exposure. Document your risk controls and performance attribution methods clearly.
5. Establish position sizing rules based on volatility measurements – Crypto markets show higher volatility than traditional assets, requiring different risk management approaches. Set maximum position limits for individual tokens and overall portfolio exposure.
6. Create arbitrage opportunities across different crypto exchanges – Price differences between exchanges create profit potential for skilled arbitrageurs. Build technology infrastructure to identify and execute these trades quickly.
7. Define your investment universe and excluded asset classes – Decide which cryptocurrencies, DeFi tokens, and blockchain projects fit your strategy. Some funds focus on large-cap coins while others target emerging altcoins.
8. Set performance benchmarks against relevant crypto indices – Compare your returns to Bitcoin, Ethereum, or broader crypto market indices. This helps investors understand your value-add versus passive investment options.

What Should Be Included in a Crypto Hedge Fund Business Plan?

A solid business plan forms the backbone of any successful crypto hedge fund. Your plan must address the unique challenges of digital assets while meeting the expectations of institutional investors and the Securities and Exchange Commission (SEC).

1. Executive Summary – Write a clear overview of your fund’s mission, target returns, and competitive advantages in the crypto space. Include your fund size goals and expected timeline for launch.
2. Investment Strategy Definition – Detail your specific approach to digital assets, whether focusing on long/short equity positions, quant strategies, or arbitrage opportunities. Explain how your strategy differs from traditional hedge funds and venture capital funds.
3. Risk Management Framework – Outline comprehensive risk controls due to crypto market volatility, including position limits, stop-loss mechanisms, and portfolio diversification rules. Address how you’ll handle the unique risks of blockchain capital investments.
4. Team Structure and Roles – List key personnel including fund managers, chief operating officer, and compliance experts with relevant crypto experience. Show how your team’s background supports your investment approach and operational needs.
5. Regulatory Compliance Plan – Document your approach to SEC registration, anti-money laundering (AML) requirements, and know-your-customer (KYC) procedures. Include plans for ongoing regulatory reporting and compliance monitoring.
6. Technology Infrastructure – Describe your secure custody solutions, trading platforms, and cybersecurity measures for protecting digital assets. Explain your backup systems and disaster recovery protocols.
7. Capital Raising Strategy – Outline your approach to attracting initial investors, including target investor types and minimum investment amounts. Detail your marketing plan for reaching high-net-worth individuals and institutional clients.
8. Financial Projections – Provide realistic revenue forecasts, expense budgets, and fee structures for your crypto hedge fund. Include scenarios for different market conditions and growth trajectories.
9. Operational Procedures – Define daily operations including trade execution, portfolio reporting, and investor communications. Address how you’ll handle the unique aspects of crypto trading and settlement.
10. Exit Strategy Considerations – Plan for potential fund closure scenarios and how you’ll handle investor redemptions during market stress. Consider how crypto millionaires might impact your fund’s growth and exit planning.

Legal and Regulatory Requirements

Starting a crypto hedge fund means dealing with complex legal rules that change often across different countries. You’ll need to understand securities laws, register with financial authorities, and follow strict anti-money laundering requirements that can make or break your fund’s future.

What Local Laws and Regulations Apply to Crypto Hedge Funds?

Crypto hedge funds face strict federal oversight in the United States. U.S. funds managing over $150 million must register with the SEC, creating a clear regulatory threshold for institutional investors.

Fund managers must comply with Investment Advisers Act requirements, which include detailed reporting and fiduciary duties. State securities laws also apply, varying by jurisdiction where the fund operates or solicits investors.

Compliance with Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations is mandatory for all crypto hedge funds. These rules require extensive documentation of investor identities and transaction monitoring.

Different legal structures, such as Limited Partnerships (LP) and Limited Liability Companies (LLC), are essential for fund registration and determine tax treatment. Venture capital (VC) regulations may apply if the fund invests in early-stage blockchain companies.

Securities laws govern how funds market to high-net-worth individuals and institutional investors, restricting public advertising and requiring specific investor qualifications.

Regulatory compliance isn’t just about following rules, it’s about building trust with institutional investors who demand transparency and accountability in digital assets management.

How Do You Register a Crypto Hedge Fund?

Registering a crypto hedge fund requires careful attention to legal requirements and regulatory compliance. Fund managers must complete specific registration processes that vary by jurisdiction and fund size.

1. File Form ADV with the SEC if your fund manages over $150 million in assets under management, as required by the Investment Advisers Act of 1940.
2. Select your jurisdiction carefully, with many institutional investors favoring the Cayman Islands due to beneficial regulatory conditions for hedge funds.
3. Create a limited liability partnership structure to protect fund managers and offer operational flexibility for your investment strategy.
4. Submit all required documentation to local financial authorities, including detailed business plans and investment strategy outlines for regulatory review.
5. Register with the Commodity Futures Trading Commission if your fund trades futures markets or uses highly leveraged derivative instruments.
6. Obtain necessary licenses for investment banking activities if your fund plans to engage in direct investment or merger arbitrage strategies.
7. Complete anti-money laundering registration requirements and establish Know Your Customer procedures before accepting any investor capital.
8. Set up proper reporting structures to comply with ongoing regulatory obligations, including quarterly filings and investor communications.
9. Secure professional liability insurance coverage to protect against potential legal claims related to fund management activities and investment decisions.

How Do You Ensure Compliance with AML and KYC Regulations?

Crypto hedge funds face strict rules about knowing their clients and stopping money laundering. Fund managers must build systems that check every investor and watch all transactions closely.

1. Implement continuous transaction monitoring systems that track all digital assets movements and flag suspicious activities automatically across your fund’s portfolio.
2. Establish comprehensive KYC procedures that verify each investor’s identity, source of funds, and risk profile before allowing any capital contributions to your hedge fund.
3. Follow the Financial Action Task Force (FATF) Travel Rule requirements by sharing detailed transaction information with other Virtual Asset Service Providers during transfers.
4. Create detailed AML policies that outline specific procedures for detecting, reporting, and preventing money laundering activities within your crypto hedge fund operations.
5. Train all team members on compliance requirements, including fund managers, analysts, and administrative staff who handle investor communications and transaction processing.
6. Conduct regular compliance audits with external firms that specialize in cryptocurrency regulations to ensure your fund meets all current legal standards.
7. Maintain detailed records of all investor communications, transaction histories, and compliance checks for regulatory inspections and internal risk management purposes.
8. Partner with established custodians like Coinbase Ventures or other institutional-grade services that already meet strict AML and KYC compliance standards.
9. File required reports with financial authorities promptly, including suspicious activity reports and large transaction notifications as mandated by local regulations.

Setting up proper compliance systems protects your fund from legal issues and builds trust with institutional investors who demand strict regulatory adherence.

Building Your Team

Building the right team makes or breaks your crypto hedge fund — you need skilled fund managers who understand digital assets, plus legal and compliance experts who can keep you out of regulatory hot water.

How Do You Hire Experienced Fund Managers?

Finding the right fund managers for your crypto hedge fund requires a different approach than traditional finance hiring. You need people who understand digital assets, not just conventional investment strategies.

1. Look for coding and statistical skills over traditional finance backgrounds. Most successful crypto fund managers can analyze blockchain data and build trading algorithms. Skip candidates who only have MBA credentials without technical expertise.
2. Check their GitHub profiles and token launch history for real crypto experience. Active developers who have launched tokens or contributed to blockchain projects show genuine understanding. This practical knowledge beats theoretical finance education every time.
3. Focus on profit generation track records at smaller funds rather than big-name credentials. Crypto hedge funds care more about returns than fancy degrees from top schools. Ask for specific performance numbers from previous crypto investments.
4. Test their knowledge of quant strategies and algorithmic trading systems. Strong candidates should explain how they use data to make investment decisions. They need to understand both traditional metrics and crypto-specific indicators.
5. Evaluate their network within institutional investors and venture funds. Good managers have connections with coinbase ventures, blockchain capital, and other major players. These relationships help attract capital and deal flow.
6. Assess their understanding of exchange-traded funds and convertible bond markets. Crypto funds often trade across multiple asset classes, including traditional securities. Managers need broader market knowledge beyond just digital currencies.
7. Interview candidates about their experience with distressed debt and equity fund operations. Market downturns reveal true skill levels in fund management. Look for people who have navigated crypto bear markets successfully.
8. Verify their compliance knowledge around AML and KYC regulations. Fund managers must understand legal requirements for institutional investors and high-net-worth individuals. Regulatory mistakes can shut down your entire operation.

How Do You Recruit Legal and Compliance Experts?

Legal and compliance experts form the backbone of any successful crypto hedge fund operation. These professionals ensure your fund meets all regulatory frameworks while protecting institutional investors from potential legal risks.

1. Target candidates with specific qualifications in cryptocurrency regulations, focusing on those who understand AML and KYC requirements for digital assets and have worked with institutional investors previously.
2. Collaborate with specialized service providers who can help structure appealing roles that attract top-tier compliance officers with experience in hedge funds and private equity sectors.
3. Look for professionals who have worked at established firms like Coinbase Ventures or Brevan Howard, as they bring valuable experience with regulatory frameworks and institutional client management.
4. Screen candidates for their understanding of exchange-traded funds (ETFs) regulations, since many crypto hedge funds eventually expand into these investment vehicles for broader market access.
5. Prioritize hiring compliance officers who have experience with M&A transactions and financing deals, as these skills become crucial during fund growth and expansion phases.
6. Seek legal experts who understand both traditional hedge fund structures and the unique challenges of managing digital assets for high-net-worth individuals and institutional clients.
7. Evaluate candidates’ experience with interest rate regulations and bond arbitrage compliance, since many crypto funds employ quant strategies that intersect with traditional financial instruments.
8. Consider professionals who have worked with VC funds or blockchain capital firms, as they understand the unique valuations and regulatory challenges in the crypto space.
9. Focus on recruiting team members who can work effectively with fund managers to ensure all investment strategies comply with evolving regulatory requirements for digital assets.

Raising Capital

Raising capital for your crypto hedge fund requires building trust with institutional investors and high-net-worth individuals who understand digital assets, while demonstrating your fund’s potential through solid quant strategies and proven track records that attract backing from established players like Coinbase Ventures and Blockchain Capital.

How Can You Attract Initial Investors?

Attracting initial investors to your crypto hedge fund requires a strategic approach that establishes credibility and demonstrates value. Fund managers must show their commitment by investing their own money first, which proves confidence in their investment strategy.

1. Invest your own capital first – Allocate your personal money into the fund before asking others to invest. This shows institutional investors and high-net-worth individuals that you have confidence in your quant strategies and digital assets approach.
2. Create a compelling track record – Document your past performance with crypto investments, even if they were personal trades. Potential investors want to see evidence that your long/short equity strategies work in volatile markets.
3. Develop a clear value proposition – Explain specifically how your fund differs from traditional hedge funds and equity funds. Focus on your unique approach to blockchain capital and digital assets management.
4. Build relationships with VCs and venture capital firms – Connect with established players like Coinbase Ventures who understand the crypto space. These connections can lead to introductions with serious investors.
5. Be completely transparent about risks – Discuss potential losses, interest rates impact, and market volatility openly. Honest communication builds credibility faster than overpromising returns.
6. Target crypto-savvy investors first – Approach people who already understand digital assets rather than trying to educate traditional investors. This saves time and increases your success rate.
7. Present professional financial projections – Use models like the dividend discount model to show potential returns. Include scenarios for different market conditions and interest rates environments.
8. Use your professional network – Reach out to former colleagues, business contacts, and industry connections. Personal relationships often lead to the first investments in new funds.
9. Offer competitive fee structures initially – Consider lower management fees for early investors to attract capital. This strategy helps build your asset base while proving your investment skills.

How Do You Build Relationships with Venture Capitalists and High-Net-Worth Individuals?

Once you attract initial investors, focus on developing deeper connections with venture capitalists and high-net-worth individuals. Strong relationships with these key players will help your crypto hedge fund grow and succeed over time.

1. Consider venture capitalists as partners, not just money sources. This approach creates positive relationships that benefit both parties. View them as strategic allies who bring expertise and connections to your fund.
2. Create trust through transparency and open dialogue with all potential investors. Share your investment strategy clearly and discuss both wins and losses honestly. This openness helps establish credibility in the digital assets space.
3. Concentrate on networking and developing long-term relationships to enhance investor confidence. Attend industry events where institutional investors gather. Make genuine connections rather than just pitching your fund immediately.
4. Study each venture capitalist’s investment history before meeting them. Learn about their portfolio companies and investment preferences. This knowledge helps you tailor your pitch to their specific interests.
5. Show your expertise in quant strategies and blockchain technology during conversations. Explain how your fund managers use data-driven approaches. Describe your edge in the crypto markets clearly and confidently.
6. Interact with established players like Coinbase Ventures and Blockchain Capital for insights. Examine their investment patterns and portfolio companies. These connections can provide valuable market intelligence for your fund.
7. Keep regular communication with investors through updates and reports. Send quarterly performance summaries and market analysis. Inform them about your fund’s progress and future plans.
8. Highlight your team’s credentials and track record when meeting high-net-worth individuals. Emphasize your fund managers’ experience and past successes. Explain how your team’s expertise translates to better returns.

Setting Up Operations

Setting up operations for your crypto hedge fund means building the backbone that keeps your digital assets safe and your business running smoothly—from picking the right custodian to creating bulletproof tech systems that protect millions in cryptocurrency investments.

How Do You Choose a Custodian for Crypto Assets?

Choosing the right custodian for your crypto hedge fund protects your digital assets and builds trust with institutional investors. The wrong choice can expose your fund to security breaches and regulatory issues.

1. Research custodians with proven track records serving institutional investors and hedge funds. Look for companies that have secured billions in digital assets without major security incidents over multiple years.
2. Verify the custodian offers both hot wallets for quick transactions and cold wallets for enhanced security through offline storage. Hot wallets carry higher risks of online breaches but enable faster trading execution.
3. Confirm the custodian uses Multi-Signature (Multisig) technology requiring multiple approvals for transactions. This advanced security measure prevents single points of failure and unauthorized asset transfers.
4. Evaluate custodians that implement Multiparty Computation (MPC) for improved security in crypto custody operations. MPC technology distributes cryptographic keys across multiple parties, reducing theft risks significantly.
5. Check if the custodian maintains proper insurance coverage for digital assets under their protection. Insurance policies should cover both hot and cold storage solutions with adequate coverage limits.
6. Review the custodian’s compliance with Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations in your jurisdiction. Regulatory compliance protects your fund from legal complications and potential shutdowns.
7. Assess the custodian’s API integration capabilities and trading platform connections for your quant strategies. Smooth technical integration enables efficient execution of long/short equity positions and automated trading systems.
8. Compare fee structures across different custodians, including setup costs, monthly maintenance fees, and transaction charges. Cost efficiency directly impacts your fund’s profitability and investor returns.
9. Test the custodian’s customer support responsiveness and technical expertise through initial consultations. Reliable support becomes critical during market volatility and technical emergencies.

Once you select your custodian, you need to establish a secure technology infrastructure that supports your trading operations.

How Do You Establish a Secure Technology Infrastructure?

Building a secure tech foundation protects your crypto hedge fund from hackers and system failures. Strong infrastructure keeps your digital assets safe and helps you follow rules that institutional investors expect.

1. Choose between Software-as-a-Service (SaaS) solutions for quick setup and lower costs or self-building for full control and customization based on your fund’s specific needs.
2. Select SaaS solutions if you want minimal technical expertise requirements and integrated compliance features that help meet regulatory standards faster.
3. Install multi-signature wallets that require multiple approvals before any crypto transactions can happen, adding extra security layers for your digital assets.
4. Set up cold storage systems that keep most of your crypto offline, away from internet threats that target online wallets and exchanges.
5. Create backup systems that automatically copy your data to secure locations, so you never lose important information about your fund operations.
6. Build firewalls and encryption that protect your network from outside attacks while keeping sensitive fund data private from unauthorized access.
7. Establish 24/7 monitoring systems that watch for suspicious activity and alert your team immediately when something looks wrong with your infrastructure.
8. Implement two-factor authentication for all team members accessing your systems, making it much harder for bad actors to break into your accounts.
9. Test your security regularly by running simulated attacks that help you find weak spots before real hackers discover them first.
10. Document all your security procedures so new team members know exactly how to handle sensitive operations and maintain your fund’s safety standards.

Marketing Your Fund

Once you’ve built your crypto hedge fund, you need to get the word out to potential institutional investors and high-net-worth individuals who might want to invest in your digital assets strategy.

How Do You Develop a Professional Website?

Your professional website serves as the digital representation of your crypto hedge fund, creating initial impressions for potential institutional investors. A well-designed platform presents your investment strategies and establishes credibility in the competitive digital assets market.

1. Create a visually appealing interface that represents your fund’s professional image and simplifies navigation for visitors seeking information about your crypto hedge funds.
2. Communicate your investment strategies clearly on dedicated pages, explaining how your fund managers approach long/short equity positions and quant strategies in digital assets.
3. Display performance metrics prominently, including assets under management (AUM) figures and historical returns to establish trust with potential investors.
4. Provide educational resources that inform visitors about the crypto landscape, blockchain technology, and market trends affecting institutional investors.
5. Emphasize your fund’s approach to risk management and portfolio diversification strategies, demonstrating how you protect investor capital across various digital assets.
6. Implement user-friendly design elements that improve visitor experience and provide easy access to critical information about your hedge funds.
7. Present legal requirements and compliance information clearly, showing your fund’s adherence to regulatory standards and investor protection measures.
8. Showcase your team’s expertise and backgrounds, especially highlighting connections to established firms like Coinbase Ventures or Blockchain Capital if applicable.
9. Ensure fast loading speeds and mobile responsiveness so potential investors can access your site efficiently across all devices and platforms.

How Can You Leverage Networking and Industry Events?

Building a professional website creates your digital presence, but face-to-face connections at industry events often seal the deals that matter most. Networking at industry events can help fund managers build relationships and credibility in the cryptocurrency sector.

1. Attend major crypto conferences like Consensus, Bitcoin Miami, and Token2049 to meet institutional investors and blockchain capital representatives who actively fund new ventures.
2. Join exclusive hedge fund gatherings where you can connect with experienced fund managers who understand quant strategies and digital assets management.
3. Participate in Coinbase Ventures meetups and similar venture capital events to build relationships with high-net-worth individuals seeking crypto investment opportunities.
4. Speak at panels about long/short equity strategies in crypto markets to establish yourself as a thought leader among potential investors.
5. Attending events allows fund managers to stay informed about industry trends and regulatory changes that affect crypto hedge funds operations.
6. Schedule one-on-one meetings with economist experts and compliance specialists during conference breaks to discuss regulatory frameworks.
7. Engaging with potential investors through social media enhances outreach and visibility after meeting them at live events.
8. Host private dinners or cocktail receptions during major conferences to create intimate settings for deeper investor conversations.
9. Follow up within 48 hours after meeting prospects at events with personalized messages referencing your specific conversation topics.

How Will Crypto Hedge Funds Evolve in 2025?

Crypto hedge funds will see massive growth in 2025 as institutional investors pour money into digital assets. Confidence in digital assets is recovering due to regulatory advancements and increased institutional interest, with 47% of traditional hedge funds now having exposure to digital assets, up from just 29% in 2023.

Fund managers are building stronger quant strategies that use artificial intelligence and machine learning to spot trading opportunities faster than human traders. Major players like Coinbase Ventures and Blockchain Capital are expanding their crypto offerings, while 58% of traditional hedge funds now trade digital asset derivatives, jumping from 38% in 2023.

The shift toward long/short equity strategies in crypto will dominate the market as fund managers learn to hedge their bets better. Institutional clients are driving this change, with 43% of hedge funds reporting rising interest from family offices and high-net-worth individuals who want crypto exposure without the headaches of direct ownership.

Regulatory clarity will unlock billions in new capital as pension funds and insurance companies finally get approval to invest in crypto hedge funds. Smart contracts will automate more trading decisions, while custody solutions become cheaper and more secure, making it easier for smaller funds to compete with the big players.

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