Fidelity research shows strong trend in cryptocurrency investment

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Financial services giant, Fidelity, through a survey found that even more institutions have invested in cryptocurrencies than a year ago, despite the global market downturn, and a 74% share said they are ready to invest further in digital assets in the future.

58% held cryptocurrencies

Fidelity found that 58% of investors surveyed reported holding digital assets in the first half of 2022, an increase of 6% year-on-year.

These results were captured through Fidelity’s fourth annual Fidelity Digital Assets Institutional Investor Study.

“While the markets have faced headwinds in recent months, we believe the fundamentals of digital assets remain strong and that the institutionalization of the market over the past few years has helped it weather recent events,” said Fidelity Digital Assets President Tom Jessop.

The survey involved 1,052 institutional investors from Asia, Europe and the US.

Digital asset ownership was highest in Asia, at 69%. This figure was lower in Europe (68%) and the US (42%), although the figures represented an increase of 11 and 9 points, respectively, from a year ago.

Which institutions are investing?

High net worth investors led the gains in Europe and the US, while financial advisors also contributed to the increase in Europe.

Overall, global use of digital assets is highest among venture capital funds (87%), followed by high net worth individuals (82%) and advisors (73%).

Critical advisors

Ark Invest’s Chief Operating Officer Tom Staudt told Blockworks that advisors – a segment he said had long been ignored by the cryptocurrency industry – will be critical to the mass adoption of cryptocurrencies.

Ark and other firms, such as Franklin Templeton and Valkyrie Investments, have released cryptocurrency-focused segregated management accounts (SMAs) for investment professionals.

They understood the technology and value proposition

Despite the market downturn, institutional investors have now gained an understanding of the technology and value proposition of digital assets, said Chris Kuiper, research director at Fidelity Digital Assets. He added that the increase in infrastructure and investment products available to institutions likely contributed to higher adoption rates.

“Investors surveyed cited the high potential and innovative technology play of this emerging industry, along with decentralization, non-correlation to other assets and the current macro/inflation environment, as attractive features of this asset class,” he told Blockworks.

Nearly 40% of institutions are buying digital assets directly, with Bitcoin and Ethereum being the most popular.

What they choose

Of those surveyed, 35% said they buy cryptocurrency investment products, while 30% buy investment products held by digital asset companies and 20% gain exposure through futures contracts.

Increasing respect

The loyalty survey shows growing respect for cryptocurrencies. Some 35% of respondents believe digital assets should be treated as an independent investment category, up from 23% in 2021.

“This is one of several data points that validate the trends we are seeing in our own business: increased institutional involvement and recognition of the maturing digital asset market and infrastructure,” Kuiper said.

74% will buy

74% of institutions surveyed said they plan to purchase digital assets in the future.

Future purchase preference remained stable year-over-year globally for financial advisors, family offices, pensions, cryptocurrency hedge funds and venture capital funds, as well as endowments and foundations.

Half of respondents cited price volatility as the biggest barrier to investing in cryptocurrencies, according to Fidelity’s 2021 study.

“While short-term price volatility is a characteristic somewhat inherent to this emerging asset class, many of the other concerns cited by respondents can be addressed as institutional investors move forward on their education journey,” Kuiper said.

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