The cryptocurrency market is relatively young. The attraction of institutional investors to Bitcoin and cryptocurrencies is even more recent. Thus, no one had yet been able to truly assess the behavior of institutional investors during a crypto winter.
Entering the asset class in the wake of the COVID-19 pandemic, institutional investors continue to support Bitcoin and Ether, according to a study by Fidelity Digital Assets, which surveyed 1,000 investors in Europe, the United States, and Asia. Bitcoin and Ether are the favorite crypto assets of institutional investors.
The Fidelity Digital Assets study looks at the first half of 2022 when the major crypto assets were not yet down but had already clearly begun their descent.
Despite these headwinds, nearly 60% of institutional investors surveyed said they invested in digital assets over the period. Year-over-year, adoption was up 9 points in the U.S. (42%) and 11 points in Europe (67%), but down slightly in Asia (69%), where penetration is already highest.
Year-on-year, the perception of Bitcoin and crypto-currencies among these players — hedge fund managers or financial advisors — has increased by 8 points overall (57%). In addition, 81% now believe that these assets should be present in a portfolio.
The main driver for the adoption of cryptocurrencies is the potential return (43%) sought, which confirms their speculative DNA. This is followed by their innovative nature (41%) and the possibility of investing in a decentralized manner (29%).
Unlike in 2021, institutional investors are no longer betting on crypto-currencies to escape market trends. Bitcoin and Ether are indeed currently correlated to the Nasdaq. While volatility has subsided in recent months, it remains the biggest deterrent (50%) to getting in. Like last year, the other barriers to entry in 2022 are the lack of fundamentals to assess the value of an asset (37%) and security issues (35%) — the main cryptocurrency exchange sites have already suffered several large-scale hacks — on par with the risk of manipulation.
Even though rising rates are pushing investors toward less risky assets, more institutional investors (74%) plan to increase their position in cryptocurrencies in the future. In contrast, traditional funds are now much more cautious (38%).
Fidelity Digital Assets already offers cryptocurrency custody services for institutions — something it just expanded to Ether, which is seen in a more favorable light since its move to Proof-of-Stake. That’s a mistake in my opinion, but since many institutional investors aren’t interested in the technology, but rather the potential for return on investment, it won’t surprise you.
"Ethereum 2.0: How the Centralization of the Network Makes It a Scary Censorship Machine."
Other big financial players have been jumping into this market recently. Fidelity Digital Assets is going to face increasing competition. This is the case of Nasdaq, which follows in the footsteps of Goldman Sachs, State Street, or Deutsche Bank.
While hope for a rebound is reborn despite an unstable international environment, a survey conducted in mid-October 2022 by Cointelegraph among 84 funds with $316 billion in assets under management, learns that a majority of Whales is standing by, with plans to buy cryptocurrencies already well defined.
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