Over the next five years, institutional investors will pump more funds into investing in digital assets as acceptance of crypto continues.
According to a survey report undertaken by financial analytics firm Coalition Greenwich, over half of 1,100 industrial investors surveyed said they plan to actively invest in digital assets. These digital assets investments include procuring stocks in cryptocurrency firms, investment products with crypto exposure, or direct investment in crypto itself. Generally, institutional investors are optimistic about investing in digital assets.
Seven in 10 institutional investors surveyed between December 2020 and April 2021 said they already had digital assets investments. Of those interested in investing in the future, 90% expected their company or client portfolios to include digital assets. The respondents expect this to happen within five years.
The pool surveyed includes high net worth investors, digital and traditional hedge funds, family offices, financial advisors, and endowments.
Volatility was cited as the prime obstacle to crypto investment. Other red flags raised were market manipulation and a lack of fundamentals determining crypto’s value.
The study was undertaken on behalf of Fidelity Digital Assets, a cryptocurrency business of Boston-based Fidelity investments that offers institutional investors custody and execution services for digital assets. The company was one of the foremost mainstream financial service providers to embrace cryptocurrencies. This decision then began attracting established financial institutions in increasing amounts.
Does the Growing Trend of Institutional Investors in Digital Assets Augur Well for Crypto?
Bitcoin price has since fallen about 50% from an all-time high of about $64,000 since April. Other cryptocurrency prices and trading volumes have also tumbled. Last month, JPMorgan Chase & Co found in a survey that only 10% of institutional investment firms trade cryptocurrencies, with nearly half classifying the emerging asset class as “rat poison” or predicting it would be a temporary fad.
The positive crypto outlook could be a renewal of interest to spark up the belief that markets rise again. This should work because institutional investors may have the clout to drive the conversation around crypto and create an upsurge in demand. If there comes some solution to many market problems, the crypto market may begin to pump again very soon.
Last month, TP ICAP launched a crypto trading platform. The world’s, inter-dealer broker, the company launched the platform in collaboration with Fidelity and Standard Chartered‘s digital assets custody unit.
Institutional Investment and Bitcoin Shortage
In February, Glassnode released a report stating that there could be a Bitcoin shortage if institutional investors continue acquiring bitcoin. According to the Uncharted #4 report, a scarcity is possible based on the company’s ‘Liquid Supply Change’ chart. The report specified that the “supply on the bitcoin blockchain is further drying up” regardless of the healthy prices at the time. Glassnode predicted a “massive supply squeeze” if this trend continues unchecked. However, this possibility may not occur anytime soon as at the moment. This might be because there is still considerable inflow into the market from retail and institutional investors alike.
Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to demystify crypto stories to the bare basics so that anyone anywhere can understand without too much background knowledge.
When he’s not neck-deep in crypto stories, Tolu enjoys music, loves to sing and is an avid movie lover.