Following the ebbing of the crypto winter, Fidelity Investments’ Digital Assets arm (FDAS) took it upon itself to find out the future landscape of cryptocurrency investments, especially for institutional investors.
In a recent survey by the firm, in which it interviewed over 400 institutional investors including crypto hedge funds, family offices, and endowments, FDAS found that there is a general bullish sentiment from a majority of the investors.
“Nearly half of respondents (47%) appreciate that digital assets are an innovative technology play. 46% find digital assets’ low correlation to other assets among the most appealing characteristic. Financial advisors (74%) and family offices (80%) view the characteristics of digital assets most favorably.”
The survey also revealed that as many as 22% of the survey participants had some exposure to digital assets. Speaking to The Block, the head of FDAS Tom Jessop stated that:
“We just completed a survey of about 450 institutions, so everything from family offices to registered investment advisors to hedge funds. It’s interesting, I think about 20% indicated that they currently allocate to digital assets with an intention to grow that.”
Over the coming five years, as many as 40% of the respondents admitted that they will be open to investing in digital assets either directly or indirectly. Similarly, about half of the respondents (47%) see a place within their portfolio.
According to Jessop, a majority of the investors (72%) have a preference for purchasing crypto investment products while 57% are willing to purchase the same assets directly. 57% are willing to purchase an investment product that holds a digital asset company.
“More institutional investors are engaging with digital assets, either directly or through service providers, as the potential impact of blockchain technology on financial markets—new and old—becomes more readily apparent,” Jessop added.
Digital assets are especially appealing to institutional investors due to their characteristic nature of being unrelated to traditional assets. Most investors are willing to hedge their bets using the assets like Bitcoin as they have proven to have a lesser correlation to traditional stocks and bonds. Other reasons that contributed to the investors’ choice to invest include the fact that Digital assets are an innovative new asset class.
About 47% of the respondents actually went with this option. On the other hand, the few investors that chose to stay on the sidelines cited the extreme volatility of the digital assets as the main discouraging factor followed by lack of proper regulatory procedures and appropriate fundamentals to back the asset class as a close second and third reason for not investing.
“Price volatility, which was a primary concern of survey respondents, may dampen as the underlying custody, trading and financing infrastructure continues to develop in a direction that traditional market participants are familiar with,” Jessop said.