- PwC says crypto hedge funds are continually adopting the DeFi space.
- The PwC Annual Global Crypto Hedge Funds Report 2021 revealed that total AUM with crypto hedge funds increased from $2 billion in 2019 to $3.8 billion in 2020.
Crypto hedge funds are showing increasing interest in the Decentralized Finance (DeFi) space. A recent report from PwC and the Alternative Investment Management Association (AIMA) highlighted the growing adoption of DeFi products among crypto hedge funds.
PwC releases 3rd annual global crypto hedge fund report
Titled “Annual Global Crypto Hedge Funds Report 2021,” the report revealed that the total assets under management (AUM) with crypto hedge funds globally grew in 2020. PwC noted that the AUM jumped from $2 billion recorded in 2019 to $3.8 billion in 2020.
PwC added that the percentage of crypto hedge funds managing more than $20 million increased to 46 percent in 2020. Before then, crypto hedge funds with AUM over $20 million were 35 percent. Speaking further on DeFi growth among crypto hedge funds, PwC wrote:
The average AuM for this year’s surveyed funds increased from US$12.8 million to US$42.8 million, while the median AuM increased from US$3.8 million to US$15.0 million. The media AuM at fund launch is US$1 million, indicating that funds have generally seen an impressive 15X increase in AuM.
Furthermore, the report showed that 31 percent of crypto hedge funds utilize decentralized exchanges (DEXs). Out of the total decentralized exchanges used by crypto hedge funds, Uniswap is the most widely used. According to PwC, Uniswap represents 16 percent utilized, followed by 1inch, which equals 8 percent, and then SushiSwap, which takes 4 percent.
Despite major cryptocurrencies being on a decline, DeFi-backed tokens have been pulling in gains. Chainlink (LINK) is in 20 percent of hedge fund investments, Polkadot (DOT) makes up 28 percent, while AAVE represents 27 percent.
Crypto hedge funds grow appetite for DeFi
Additionally, the PwC report said that crypto hedge funds are involved in cryptocurrency staking, lending, and borrowing. The report presented an analysis showing that 41.6 percent stakes, 32.6 percent lends, while 23.6 percent borrows.
More traditional financial institutions are also showing interest as crypto hedge funds explore the DeFi space. PwC Crypto Leader Henri Arslanian commented:
Whilst they may be still far from using decentralized applications, many financial institutions are trying to be more educated and try to understand the potential impact that DeFi may have on the future of financial services.
The recent crash in the crypto market, which affected several cryptocurrencies, has led to a fall in the total value locked (TVL) on all DeFi platforms. According to data compiled by Defi Llama, TVL has plunged from its all-time high of over $164 billion on the 10th of May. However, the total value locked has now plunged to $104.37 billion. The Defi Llama data further revealed that AAVE dominates the list with a $10.34 billion total value locked.
Apart from the crypto market crash, the DeFi sector has also been under pressure, with hackers exploiting huge funds. Recently, Binance Smart Chain (BSC) exchange PancakeBunny lost more than $200 million to hackers. Before then, DeFi protocol bEarn lost $11 million in stablecoin in an attack.