Jamie Williamson* says even traditionally conservative investors are beginning to see crypto currency in a favourable light.
A new study shows close to 80 per cent of institutional investors and wealth managers are now looking favourably upon cryptocurrencies, citing strong capital growth and diversification benefits.
Commissioned by digital assets hedge fund manager Nickel Digital Asset Management, the research claims 43 per cent of investments have a significantly more positive view of Bitcoin compared to at the beginning of the pandemic.
A further 35 per cent say their view has improved slightly while just 9 per cent maintain a negative view.
When it comes to how they consider Ethereum, 77 per cent say their view has improved while 7 per cent remain negative.
In terms of why their views have shifted, 58 per cent of the institutions and wealth managers surveyed cited strong capital growth and 53 per cent said it was because crypto and other digital assets demonstrated more attractive diversification benefits compared to mainstream asset classes.
Other reasons highlighted include improving custodial services, improving market cap and its positive impact on liquidity, improving regulation, increased options and the overall growth of decentralised finance.
“Many cryptocurrencies have performed well since the coronavirus crisis started.
“From 1 January 2020, the value of Bitcoin and Ethereum have increased by 460 per cent and 1812 per cent respectively,” Nickel Digital head of institutional sales Fiona King said.
“The crypto and digital markets have also matured a great deal, providing greater custodial services and liquidity for example.
“There is still much more to be done – especially in the area of regulation – but the market will continue to evolve and grow, and as this happens long-term perceptions of crypto and digital assets will improve even further, and professional investors will increase their allocation to them.”
The research surveyed 50 institutional investors and 50 wealth managers across the US, UK, Germany, France and the United Arab Emirates.
Another recent study commissioned by the same firm showed 79 per cent of institutional investors and wealth managers hadn’t yet invested in cryptocurrencies because of concerns over asset security.
Other reasons cited were price volatility and the regulatory environment, while 12 per cent also highlighted the carbon footprint of Bitcoin and other currencies.
In the US, the Securities and Exchange Commission is pushing to be given increased powers in policing crypto trading, lending and platforms.
According to the survey, if this were to happen, 73 per cent of professional investors believe this would have a positive impact on the digital asset space.
*Jamie Williamson is Editor at Financial Standard.
This article first appeared at financial standard.com.au.
