The Scoop: Hedge funds have never been more convicted about crypto

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This column was co-written by Frank Chaparro, director of special projects at The Block, and Laura Vidiella of MNNC Group. The views expressed in this column are their own and do not reflect the opinions of their employers.Right after Tuesday's Uptober newsletter, the market saw a downturn, despite only a 1% dip in BTC price—funny how quickly things can shift.Overall, it’s been another mild week, consistent with the past three months. The exception was the brief relief we saw in September when most directional funds recorded gains of 10% to 15%. This was a positive sign, especially given the challenges directional funds have faced throughout 2024. However, sentiment from fund managers and subscribers suggests that change could be on the horizon. As always, we stay optimistic and prefer to zoom out for the bigger picture.Back in 2017, Preqin identified just 55 crypto funds, but by 2024 that number has surged to nearly 1,200—an impressive 21x increase. These are funds focused purely on digital assets, out of almost 30,000 funds in Preqin’s database. Additionally, 400 traditional or non-crypto funds now have exposure to digital assets.As October kicked off, most managers positioned themselves with strong long positions in line with the usual "Uptober" trend. However, with many already fully allocated, the question remains—who will step in with the additional capital needed to push markets higher by month-end? The answer remains unclear for now.According to Crypto Insights Group's monthly report, which surveys dozens of liquid crypto funds, we’re seeing some of the highest conviction levels of the year across different time horizons, reflecting the sentiment of fund managers and allocators alike. None of this comes as a surprise. As we've highlighted before, 2024 feels like a transitional year. Institutions are increasingly comfortable with the Bitcoin spot ETF, which not only broadens access but also reinforces the regulatory acceptance of the industry and soon they might be able to trade options on it. Now, the spotlight shifts to what crypto-native companies have been building quietly, as well as how non-crypto companies are integrating web3 technology into their tech stacks. It’s clear that not every innovation needs a token, a reality that both crypto startups and VCs are beginning to embrace. October brings more pressure than many might realize. From "U...

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