- Institutional investors are taking a long-term stance on crypto because they think it is here to stay.
- Some investors are taking advantage of the current crypto winter to educate themselves and lay the groundwork for the future.
- The case for investing in this new asset is constantly developing.
- Regulatory uncertainty is a major concern among most institutional investors.
A study of institutional investors revealed that, throughout the crypto winter, these investors boosted their allocations. Many of the investors saw the crypto winter as a time to onboard crypto in order to learn the technology and develop for the future.
The research sponsored by Coinbase (NASDAQ:) was carried out between September 21 and October 27 and released publicly on November 22. It shows that 62% of institutional investors with cryptocurrency holdings have raised their allocations over the past year.
The study found that only 12% of institutional investors have cut back on their exposure to cryptocurrencies. This means that, despite the recent price drops, the majority of institutional investors may still be optimistic about digital assets in the long run.
Most Institutional Investors Prefer to Buy and HODL
More than half of the investors who participated in the survey indicated that they were now utilizing or expected to adopt a buy-and-hold strategy for cryptocurrencies, with the expectation that the prices of cryptocurrencies will remain flat and range-bound over the course of the next 12 months.
Most investors think that cryptocurrency will still be important in the future and are looking at it from a long-term point of view. 72% of institutional investors believe that digital assets are here to stay, indicating that institutional adoption has reached a new level of maturity and is now firmly established, as per the survey.
Furthermore, 58% of investors said they planned to increase their portfolio’s allocation to cryptocurrencies over the next three years. Nearly half “strongly agreed” that cryptocurrency valuations will improve in the long run.
Investors’ motivations for allocating capital to this asset class are shifting, the poll suggests. Reasons given for investing include the desire to increase returns, diversify portfolios, support new technologies, and diversify risk. This is different from earlier research, which put more emphasis on the asset’s ability to protect against inflation and had a low correlation to other asset classes.
On the Flipside
- In line with previous reports, regulatory uncertainty was again cited as a major issue for investors when deciding whether or not to put money into cryptocurrency, with 64% of those expecting to invest in the next year citing such worries.
- The survey was conducted before FTX collapsed, which according to CoinShares caused a record surge in short-investment products.
- Currently, institutional investors’ total assets under management in cryptocurrencies are at $22 billion, which is the lowest level in two years.
Why You Should Care
The Coinbase study used a nationally representative sample of 140 U.S.-based institutional investors with a total of around $2.6 trillion in assets under control. The survey was done by the B2B publication Institutional Investor’s Custom Research Lab.
The case for institutions getting involved in cryptocurrencies is that large, well-thought-out investments help calm this market, which is very volatile. It is believed that having significant investors in this market would make it an attractive choice for investors, which in turn would attract a variety of new investors, ultimately resulting in more stability.
Read more on institutional investment in cryptocurrencies:
Institutional Investors Forgo Digital Assets Following FTX Crash
Institutions Transferring (BTC) to Cold Wallets: Will Prices Rise?