Trends Suggest Institutional Investors’ Appetite for Crypto Growing
Recent indications suggest there is a growing appetite for digital assets among institutional investors across the U.S. and Europe. They include Microsoft running a system that makes the foundational technical component that makes decentralized identity possible on Bitcoin and New York-based Human Rights Foundation now funding Bitcoin privacy development.
Then there is the released findings of a survey conducted among almost 800 institutional investors across the U.S. and Europe (though with no data from China or Asia as a whole) between November 2019 and March 2020 by a top financial service provider. The Fidelity Digital Assets survey shows that 36% of respondents – 27% in the U.S. and 45% in Europe – say they are currently invested in digital assets, and six out of 10 respondents believe digital assets have a place in their investment portfolio.
The survey revealed higher penetration with crypto hedge and venture funds, as well as the financial advisor, high net worth individual and family office segments as it finds almost 80% of investors now have something appealing about the asset class.
Highlights from our 2020 survey on institutional adoption:
Almost 80% of investors surveyed find something appealing about #digitalassets, with over a third of respondents saying they are currently invested
Sign up to receive the report upon release! https://t.co/H86uTkC1e4
— Fidelity Digital Assets (@DigitalAssets) June 10, 2020
Its release is ahead of JP Morgan’s report titled “Cryptocurrency takes its first stress test: Digital gold, pyrite, or something in between?” which praises how cryptocurrencies largely survived the March 12 price plunge.
The bank’s report suggests that cryptocurrencies now have “longevity as an asset class” even though “price action points to their continued use more as a vehicle for speculation than medium of exchange or store of value.”
John Wu, President at AVA Labs, says the research by Fidelity makes it clear that institutions now have the expertise, tools, and economic incentive to take action and invest in cryptocurrencies and digital assets.
“First and foremost, institutional investors have made tremendous progress in sorting the facts from fiction across the cryptocurrency ecosystem, and now have a firm understanding of the real-world value and potential of the crypto asset class,” he said. “At the same time, core infrastructures like custodians and trading technologies have matured and are now offered by established firms like Fidelity. Add the backdrop of macroeconomic uncertainty, extensive fiscal policies, and fears of monetary inflation, and the barrier between crypto being a mainstream, investable asset class isn’t as insurmountable as years past. These factors are helping to legitimize crypto to traditional institutions, and have opened the door for the next wave of investment.”
Gaps in the regulatory environment, like in the case between the US and other parts of the world, have been cited for the difference in uptake levels across regions. Seamus Donoghue, VP Sales and Business Development at METACO, believes the obstacle for large institutional money entering the sector is in the onramps to digital assets: the legacy banks and brokers that service main street, asset managers and pension funds have been slow to add the capacity to service investor needs.
“In jurisdictions where regulators have a clear taxonomy for crypto and a licensing regime such as Germany, Switzerland, Japan, and Singapore, the legacy banks can and will build capabilities,” Donoghue said, suggesting the adoption gap will widen across regions over the next year.
Institutional investment could bring stability and increased adoption to the crypto space. If the projection carved by the 91% of respondents to the Fidelity survey who are open to digital assets exposure in a portfolio that they expect to have at least 0.5% of their portfolio allocated to digital assets in five years is anything to go by, for example, then investment in the space is set to see even greater growth in coming months.