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May 23, 2024

Institutional investors boost crypto holdings, finds survey

Investors attracted by ETF approvals and price surge

Institutional investors are growing increasingly positive about cryptocurrencies, according to a recent survey, with rising interest putting new demands on IR teams in the digital assets space.

Around four in 10 institutional investors (39 percent) had some exposure to crypto in 2023, up from 31 percent in 2021, finds the poll by KPMG in Canada and the Canadian Association of Alternative Assets & Strategies.

A third say they have at least 10 percent of their portfolio in crypto assets, compared with a fifth of respondents two years ago.

When asked why they have invested in crypto, 67 percent mention maturing market and custody infrastructure, up from 14 percent in 2021, while 58 percent cite strong market performance.

The price of Bitcoin, the world’s largest cryptocurrency by market capitalization, has risen nearly 60 percent year to date, following a 150 percent increase in 2023. Ether, the second-largest cryptocurrency, is also up around 60 percent in 2024.

The market received a major boost in January when the SEC finally approved spot Bitcoin ETFs, following years of failed applications, making it easier for institutional investors to gain access to the asset class.

A separate poll, released last week, finds a sharp rise in the proportion of financial advisers who plan to recommend crypto-related opportunities to their clients.

More than a third (35 percent) of respondents say they will encourage clients to invest in the digital assets space, up from 21 percent at the end of last year, according to a report by the Digital Assets Council of Financial Professionals.

Expanding research coverage

Sue Ennis, head of IR and government relations at Hut 8, a Bitcoin-mining company listed on TSX and Nasdaq, says the spot Bitcoin ETF approval was a ‘really big moment’. It was ‘the final [feather] in Bitcoin’s cap of being a legitimate and investable asset class,’ she says.

Ennis notes that over the last six to 12 months, investor bullishness has been supported by a rise in the level of digital assets coverage by major sell-side firms, such as JPMorgan and AllianceBernstein.

‘My conversations from an IR perspective have become much more sophisticated and nuanced, versus three or four years ago, when… I was still explaining what a Bitcoin is,’ she says.

Alongside more sell-side research, there is also growing output from retail investor-focused analysts, adds Ennis. ‘These are retail investors who have a social media following of anywhere north of 5,000 on X [formerly Twitter],’ she says.

‘They’re now hosting their own X spaces… and doing their own in-depth analysis of the Bitcoin-mining equity space. I’ve actually had some buy-side investors say, Wow, this type of analysis is almost as good as, if not better than, what we see come out of Wall Street.’

Hut 8 makes a point of communicating directly with these retail analysts. For example, Ennis recently appeared on the McNallie Money YouTube channel to discuss the company’s first quarter earnings.

William Wang, head of IR at Hong Kong-listed digital assets company OSL Group, also reports a sharp uptick in institutional and retail investor focus.

‘We have seen a significant increase in interest due to regulatory clarity, crypto events – including Bitcoin’s halving – and capital inflows from ETFs, which represent the maturing and mainstream acceptance of digital assets,’ he says.

As in the US, regulatory actions have been supportive: last month, Hong Kong authorities approved the first Bitcoin and ether spot ETFs. Following the approval, OSL Digital Securities, which is part of OSL Group, was selected to be the trading platform and sub-custodian for some of the first ETFs.

‘We have become more proactive in our IR approach and have been making more trips to different regions of Asia for non-deal roadshows,’ says Wang. ‘[We have also hosted] more offline events in Hong Kong to push for not only the company, but also the ETFs.’