April 15, 2024

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Most institutional investors plan to boost crypto allocation in next three years – survey

Cryptocurrency on Binance trading app, Bitcoin BTC with altcoin digital coin crypto currency, BNB, Ethereum, Dogecoin, Cardano, defi p2p decentralized fintech market


Prices of cryptocurrencies such as bitcoin (BTC-USD) and ethereum (ETH-USD) remain at depressed levels from a year ago, but that’s not preventing institutional investors from increasing, or planning to increase, their positions.

As such, 62% of institutional investors who have crypto exposure boosted their allocations in the past year, and 58% expect to increase their holdings over the next three years despite market turmoil that’s persisted for much of 2022, according to a survey conducted between Sept. 21 and Oct. 27 by Institutional Investor Custom Research Lab.

Those stats signaled that big-money investors have taken the long-term vision of the emerging asset class, with a belief in its potential to disrupt the much larger traditional financial services industry. In fact, 72% of the respondents said they believe crypto is here to stay, according to the survey, which comprised 140 institutional U.S. investors, representing assets under management of roughly $2.6T.

Overall investor sentiment across the digital asset market has certainly been hurt by the recent meltdown of crypto exchange FTX, as well as previous high-profile downfalls (Terra ecosystem, Three Arrows Capital, Celsius) and blockchain-based hacks. On top of that, the space has been dealing with global monetary tightening and economic uncertainty. When asked about their outlook on crypto prices, 83% of investors said they see prices trading range-bound or trend lower in the next year. Still, 71% of them expect asset valuations to increase over the long term.

And while the FTX implosion continues to send shockwaves across the crypto ecosystem, some industry players think the space will mature more and keep growing in the longer term, especially as the fallout from FTX triggered increased regulatory scrutiny. The chart below shows the exceptional drawdown that prices of major cryptos have seen in just the past year, with bitcoin (BTC-USD) dropping over 71% and cardano (ADA-USD) nosediving 82%. Seeking Alpha contributor Pinxter Analytics warned that “there really isn’t a bottom” for bitcoin, though, since it’s not “backed by anything tangible.”

“We do not believe the digital asset industry has been or could be set back by one ‘rogue’ player,” Steve Russell, co-manager at Emerald, told Seeking Alpha in an emailed statement. “We believe the industry will continue to grow and the adoption of distributed technology, blockchain, stablecoins, and investing in coins and tokens is a multi-year event and this FTX moment while it will be remembered as a ‘Lehman’ moment.”

The survey showed that greater yield opportunities, exposure to innovative (blockchain) technology and potentially long-term appreciation were among the main reasons why institutional investors continued to target the evolving space. Still, most investors (64%) called for more regulatory clarity, which the crypto space lacks a fair amount of, as there’s still no singular regulatory regime overseeing the industry.

All in all, “we expect they [institutional investors] will continue to express interest and allocate — even through the short-term cycles — as challenging as they are,” Brett Tejpaul, vice president of Institutional at Coinbase Global, wrote in response to Institutional Investor’s findings.

In a rather outspoken view, Cathie Wood reiterated that bitcoin will hit $1M by 2030.