Institutional investors remain committed to digital assets despite a sharp fall in valuations and prospects for an extended ‘crypto winter’, according to new research sponsored by Coinbase.
The survey, which polled 140 institutional investors managing a collective $2.6 tn, finds 62 percent of respondents who are currently invested in digital assets increased their allocations over the last 12 months, while just 12 percent cut positions.
The majority of investors (58 percent) plan to boost their allocations over the next three years, reports the study, which was conducted by Institutional Investor’s Custom Research Lab. Around six in 10 respondents say they are currently using, or plan to use, a buy-and-hold strategy – another indicator of long-term bullishness.
Institutional interest in crypto and blockchain technology grew rapidly during the Covid-19 pandemic but has been shaken in 2022 by a sharp pull back in prices and a series of failures among major crypto lenders, investors and exchanges.
The crypto industry is still reeling from the collapse of FTX, a top crypto exchange, which filed for bankruptcy in mid-November along with 130 associated entities, including trading firm Alameda Research. The fallout from FTX’s failure continued this week with the announcement that BlockFi, a crypto lender, has filed for bankruptcy protection in the US. The filing details an outstanding loan to FTX US of $275 mn.
But the investor survey, completed before FTX’s public implosion, finds a positive long-term outlook toward crypto. Around seven in 10 respondents say they believe digital assets are here to stay. That figure rises to 86 percent among those already invested in crypto, and is almost two thirds (64 percent) among those planning to invest.
Turning to concerns, 52 percent of investors say the top worry about digital assets is the uncertain regulatory environment, followed by volatility (cited by 48 percent) and the risk of market manipulation (36 percent).
The bankruptcy of FTX and other crypto firms has led to renewed calls for greater regulation of digital assets.
‘The recent failure of a major cryptocurrency exchange and the unfortunate impact that has resulted in for holders of and investors in crypto assets demonstrates the need for more effective oversight of cryptocurrency markets,’ said Janet Yellen, US Treasury Secretary, in a statement released November 16.