Since the beginning of the year, all three major cryptocurrencies, Bitcoin, Ethereum and Ripple, have increased their value almost exponentially, performing much better than any other asset.

Cryptocurrencies outperform all other assets

Last week, Bitcoin passed $2,300 and more than doubled its value since the beginning of the year. During the same period, Ethereum increased its value from $8.24 on January 1, to $203 which represents a rise in the value of 2,367%. Ripple (XRP) has performed even better by increasing its value by 4000%, reaching $0.26 since the start of the year.

On the other hand, more traditional assets have not performed as well since the beginning of the year. The S&P 500 Index has gone up by 7.9% and NASDAQ by 15%. Regarding traditional currencies, the euro has risen against the dollar by approximately 6% and the British pound has risen by about 2%.

The numbers speak for themselves and many people find it difficult to understand the reasons why Hedge Funds have not yet capitalized on the cryptocurrency investment trend.

Reasons hedge funds hesitate to invest in cryptocurrencies

There are a few factors that make many hedge funds unwilling to invest in cryptocurrencies. These are briefly analyzed below.

Lack of knowledge: A hedge fund manager who chose to remain anonymous told CNBC that many hedge funds are unwilling to invest in a product for which they do not have sufficient knowledge and do not fully understand.

Indeed, blockchains are complicated software but they could have educated themselves in order not to miss out on the opportunity.

Security and risk: Hedge fund managers consider cryptocurrencies risky assets mainly because they are vulnerable to hackers and digital theft.

Niche asset: Hedge funds consider cryptocurrencies as niche assets that cannot yet be seriously considered for large scale investments.

Clients: Hedge funds are still finding it difficult to convince their clients to invest in cryptocurrencies. Their clients still prefer traditional investments in assets like gold.

Fears of a bubble: Hedge funds are reluctant to invest in cryptocurrencies because they are not yet convinced that the rally since the beginning of the year is not a bubble.

Thus, they wait in order to see what happens.

Factors that may change the situation

In brief, the situation can be changed if cryptocurrencies become more mainstream. For example, if large multinational banks and other financial institutions start providing services like the settlement of cryptocurrencies, perceptions might change and more people may be convinced to invest in them.