Hedge funds are rapidly deepening their involvement in cryptocurrencies as global regulatory clarity improves, according to a recent survey of institutional investors and fund managers. In 2025, 55% of traditional hedge funds reported exposure to digital assets, a notable increase from 47% the previous year. While most hedge funds currently maintain modest allocations—often less than 2% of assets under management—a significant majority plan to increase their exposure over the next year.

The primary catalyst for this trend is the evolving regulatory landscape in the United States and other leading financial jurisdictions. Nearly half of institutional respondents believe that recent regulatory changes have made them more willing to increase allocations to digital assets. These reforms have encouraged hedge funds to seek long-term returns, mitigate risk, and diversify their portfolios amid ongoing market uncertainty.

Bitcoin remains the most widely held cryptocurrency among hedge funds, followed by Ethereum and a rising interest in Solana. Growing numbers of hedge funds are also trading crypto derivatives and showing interest in tokenized assets, with more than half considering tokenization as a future investment strategy. Many are exploring exposure through spot trading, derivatives, exchange-traded products, equities, and increasingly tokenized alternatives.

Investor participation is broadening beyond the traditional family offices and high-net-worth individuals, with fund of funds, foundations, pension plans, and sovereign wealth funds entering the digital asset space. Crypto-native hedge funds continue to expand, buoyed by the industry’s increasing scale and the overall market value of crypto assets, which recently surpassed $4 trillion.

However, not all hedge funds are ready to participate. Barriers such as regulatory and tax uncertainty, investment mandates, and gaps in custody, compliance, and administration services continue to hold back some potential investors. Still, many view diversification, asymmetric return potential, and long-term performance as compelling reasons for ongoing interest in cryptocurrencies.

As greater regulatory engagement strengthens institutional confidence, hedge funds are expected to continue expanding their role in digital assets, signaling the maturation of the market and its move toward mainstream acceptance.