Seven in 10 institutions expect to buy digital assets, finds survey

Jul 21, 2021
Volatility cited as key barrier in Fidelity Digital Assets survey

More than seven in 10 institutional investors say they plan to buy or invest in digital assets in the future, according to a study from Fidelity’s cryptocurrency business, with more than half of institutions surveyed globally already invested in digital assets.

Of those interested in digital assets, 90 percent say they expect to have an allocation within the next five years, according to new research from Fidelity Digital Assets’ 2021 Institutional Investor Digital Assets Study.

Although volatility is cited as the biggest barrier to investment at the moment, the researchers note that institutions have been increasing their allocations in digital assets. Noting that adoption rates are higher in Asia (where 71 percent are already invested) than in Europe and the US, they point out that participation has increased in both those markets. Fidelity Digital Assets says 56 percent of European institutions and 33 percent of US institutions now hold investments in the asset class, up from 45 percent and 27 percent, respectively, a year earlier.

‘The increased interest and adoption we’re seeing is a reflection of the growing sophistication and institutionalization of the digital assets ecosystem,’ says Tom Jessop, president of Fidelity Digital Assets, in a statement accompanying the findings. ‘The pandemic – and fiscal and monetary measures in response to it – has been a catalyst for many institutional investors to define their investment thesis [around digital assets] and [put it into operation].’

Price volatility remains the main barrier to adoption, followed by lack of fundamentals needed to assess value, as well as concerns around market manipulation. But the findings point to a lessening of concerns about the complexity of the asset class and the market infrastructure around digital assets, compared with previous surveys.

‘The expectation that the vast majority of institutions will have some exposure to digital assets by 2026 shows that investors have a deeper understanding of the asset class and have progressed in the three-phase journey from education to adoption,’ says Jessop.

The researchers say that today, nearly eight in 10 institutional investors believe digital assets should be part of a portfolio – a belief that is strongest in Asia, where adoption rates are highest. Fidelity Digital Assets says European and US institutions are increasingly in agreement, however.

The survey of 1,100 investors across the US (408), Europe (393) and Asia (299) was carried out by Coalition Greenwich on behalf of Fidelity Digital Assets and the Fidelity Center for Applied Technology between December 2020 and April 2021.

Last month TP ICAP, the world’s biggest inter-dealer broker, announced the launch of a crypto-asset trading platform with Fidelity and Standard Chartered’s digital assets custody units.

The findings of the Fidelity Digital Assets survey clash with a study published by JPMorgan last month, which finds that just 10 percent of institutional investment firms trade in cryptocurrencies, with nearly half labeling the emerging asset class as ‘rat poison’ or predicting it would be a temporary fad.

Of those firms that did not invest, the survey – conducted at JPMorgan’s Macro Quantitative and Derivatives conference, attended by around 3,000 investors from 1,500 institutions – finds that 80 percent do not expect to start investing or trading in cyptocurrencies.

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