Cryptocurrency investments are becoming more and more attractive to institutional investors who are now looking to grow their revenue long-term by moving into crypto products.
A new survey by European investment firm Nickel Digital Asset Management found that 62% of institutions with no exposure to crypto will make their first investments within one year.
Nickel Digital polled 50 institutional investors and 50 wealth managers across the US, the UK, Germany, France, and the UAE in May and June 2020.
Profits, Increased investments, and regulation favor crypto adoption
As per the survey, 47% of the institutions said they are planning to invest in crypto long-term primarily for its potential to increase capital. 44% cited their main reason as growing confidence in cryptocurrency as an asset class due to increased crypto investments like Bitcoin by other fund managers and corporations.
A further 41% of the respondents said they are willing to invest in crypto due to the increased regulatory status of the crypto industry as more governments continue to take proactive measures towards regulation.
However, only 34% of the institutions consider cryptocurrency a good hedge against inflation, citing high volatility as a huge disadvantage to the store of value.
Henry Howell, head of business at Nickel digital, said that the survey results indicate increased cryptocurrency adoption amongst institutions.
“There’s no doubt that the crypto assets market is becoming more mainstream in the institutional and wealth management sectors.”
Howell added that several factors are driving increased institutional adoption, including solid pandemic-driven crypto market performance, growing corporate investment, and an improved crypto regulatory framework.
Cryptocurrency Adoption Is On the Rise
Since mid-September, institutions have been consecutively increasing their cryptocurrency holdings, including shares into crypto startups and investment funds. European digital assets manager Coinshares recently said the second last week of September saw $42 million in capital inflow into crypto products.
Investors allocated millions to top crypto assets like Ethereum ($3.7 million) and multi-asset funds ($3.7 million), and Solana (($ 4.8 million). The trend matches with a report by JPMorgan on September 22 saying institutional investors are switching preference from Bitcoin to Ethereum, leading to a 1% premium on Ethereum futures.
Nickel’s July survey said that the biggest friction for crypto investments by institutions is the security of custodial services and regulation. Regulators have made tremendous progress, especially in the second half of the year, to introduce sufficient regulation, including in the US.