A survey on the appetite for digital assets for institutional investors showed that 43% already have digital assets.
The latest survey conducted by Cointelegraph Research among 84 professional investors around the world revealed that of the $316 billion in assets managed by the respondents, 3.3%, or about $10.42 billion, is invested in cryptocurrencies. Some investors surveyed reported over 50% exposure to digital assets, but the average percentage of respondents who invested in cryptocurrencies is around 3%.
Risk-return was the top consideration when investing in cryptocurrencies, with 44% of respondents rating this feature “very important.” Other factors that were considered relatively less important were “diversification” and “my company is convinced that technology will be important in the future.”
Download the 2022 Global Institutional Demand for Cryptocurrency Survey report via the Cointelegraph Research Terminal
more than Bitcoin
As expected, Bitcoin
It ranks first in popularity as it is held by 94% of institutional investors who own cryptocurrencies. Ether
, however, lags behind at 75%, with security tokens, along with stablecoins, following at 31% each.
Cryptocurrencies are not the only digital assets considered by institutional investors as a buy, as some of them plan to add tokenized securities and non-fungible tokens (NFTs) to their portfolios. Another attractive area for institutional investors is metaverse platforms, as projects in the sector have already attracted $120 billion in investment by 2022.
According to McKinsey, 59% of consumers are excited about transitioning their daily activities to Metaverse. The industry as a whole is expected to reach a market impact of $5 trillion by 2030.
Institutional investors opt for crypto funds and derivatives
Despite preferring direct cryptocurrency investments over mutual funds and structured products, most institutional investors gain exposure to digital assets through passive funds, such as Grayscale’s Bitcoin Trust. Overall, annual inflows into cryptocurrency trusts reached $9.3 billion in 2021, but a slump in cryptocurrency prices in 2022 has put severe pressure on the share prices of these funds, with the passively managed ones being the largest. most affected.
In addition to buying shares of actively and passively managed funds, institutional investors are getting involved in the crypto derivatives market thanks to high liquidity. Spot markets provide between a fifth and an eighth of the liquidity of the derivatives markets for bitcoin and between a quarter and a fifth for ether. Professional investors seem to be more interested in the latter asset, as its options open interest ($5 billion) recently surpassed that of Bitcoin ($4.8 billion).
Liquidity risk is what worries investors the most
Liquidity risks emerged as the strongest barrier to cryptocurrency adoption, with 51% of respondents marking them as very important. The more volatile the asset, the less conservative investors want to keep it on the balance sheet. In the spring of 2021, Tesla sold part of its Bitcoin holdings to show shareholders how liquid the asset was. This went a long way in showing not only Tesla shareholders, but also the rest of the stock markets, that digital assets, like Bitcoin, have their benefits.
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Cybercrime and fraud risks follow operational risks, a big change from the results of the Cointelegraph survey conducted in 2020, when regulatory risks were considered the most serious. However, they remain a major hurdle preventing one in four professional investors from buying Bitcoin, according to the survey results.
This article is for informational purposes only and does not constitute investment advice, investment analysis, or an invitation to buy or sell financial instruments. Specifically, the document is not a substitute for individual investment or other advice.