Fidelity survey reveals increasing institutional appeal of cryptocurrencies
The digital currency arm of Fidelity Investments, a traditional financial firm with over $26 billion USD in assets, has conducted a survey which included more than 400 US-based institutional investors. The sample includes pensioneers, family offices, cryptocurrency & traditional hedge funds, financial advisors, and endowments & foundations, according to a press release about the findings.
Their goal approaching the research was to help Fidelity get better acquainted with the understanding of investors of digital assets both in general and as part of active investment. This also helped them better understand the likelihood of institutional investors making a digital asset investment in the next 5 years. What they discovered is an upward trend of interest and commitment with about a quarter of institutional investors already directly exposed to crypto. Most of them entered the market in the past three years.
On the other hand, institutional investors that have not already made any commitments to attaining and holding crypto assets, 40% say that they are open to making their first steps into digital assets in the next five years.
In total, about 47% see cryptocurrencies and digital assets as a part of their (current or future) investment portfolio. However, the preferences of entering the market are different for many of them. The majority would love to buy financial products that hold digital assets in them. Some of them want to buy virtual currencies directly, while others want to attain investment products which contain digital asset companies.
Whatever the actual investment method, one thing is clear. Institutional investors are getting more and more ready to make their investments in blockchain. The benefits of adopting and implementing blockchain technology are more apparent with every passing day. This causes institutional investors to feel genuine fear of missing out, as any one of the blockchain startups may end up being the next tech giant.
What makes crypto appealing to institutional investors?
Bitcoin and other limited quantity assets are a natural progression towards a new financial standard. Most of the traditional investments are pegged to the U.S. dollar as the underlying value of the asset. This disparity between the U.S. dollar and the way value is measured in the decentralized economy is one of the most appealing aspects for investors, but also the scariest.
To better explain. The limited quantity of most top ranking digital assets is a sort of unchangeable guarantee that no inflationary movements will affect the value of their investments, but in a truly free market (such as the Bitcoin market), price volatility is the weak point for most investors. Whether the appealing characteristics of immutability and limited quantity outweigh the risks of negative price volatility is stronger, will be dictated by the commitments these companies make over the next five years.
According to Tom Jessop, president of Fidelity Digital Assets, the effect of these unappealing characteristics are expected to weaken in the future. The reason for this is the overwhelming development in custody, trading, and financing infrastructure is moving in the direction familiar to traditional institutional investors.
Jessop continues to add that the investment sector has been seeing the same level of development as the underlying infrastructure. Venture capital companies are making healthy investments, a significant increase in Security Token Offerings, while the global regulatory environment remains cautiously constructive. Institutional investors are more knowledgeable about blockchain and crypto than ever before, showcasing an understanding of the level of activity on the Bitcoin blockchain, a clear sign of interest and adoption for Jessop.