Digital assets will feature higher in the investment portfolio of various institutional investors. These are the findings of a recent survey by US-based Fidelity Investments.
The company belongs to the FMR LLC family of companies, which also includes Fidelity Digital Assets and Fidelity Center for Applied Technologies. To conduct this survey, they hired Greenwich Associates, a company specialising in management consulting.
We’ve seen a maturation of interest in digital assets from early adopters, like crypto hedge funds, to traditional institutional investors like family offices and endowments.
The survey was conducted between 26 November 2018 and 8 February 2019. It included 441 institutional investors in the United States. Among these investors are digital and traditional hedge funds, pensions, family offices, financial advisors, as well as foundations and endowments.
A Growing Interest for Digital Assets
According to the survey results, almost half of the respondents (47%) believe that digital assets should be included in their investment portfolio. However, they have different views on the ways in which they would hold these assets.
- 72% would buy investment products that include digital assets;
- 57% would buy crypto assets directly;
- 57% would buy investment products that include digital asset companies.
Also, over a fifth of the respondents (22%) already have some crypto in their investment portfolio.
Institutional Investments: a Strong Case for the Legitimacy of Digital Assets
Speaking about these results, the president of Fidelity Digital Assets, Tom Jessop, said:
We’ve seen a maturation of interest in digital assets from early adopters, like crypto hedge funds, to traditional institutional investors like family offices and endowments. More institutional investors are engaging with digital assets, either directly or through service providers, as the potential impact of blockchain technology in financial markets – new and old – becomes more readily apparent.
As blockchain and crypto become a more visible part of the financial landscape, various companies discover and speak openly about their benefits. So, according to respondents in the Fidelity Investments survey these are:
- the fact that they are an innovative technology play (47%);
- the low correlation of digital to other assets (46%);
Also, among these institutional investors, family offices are the most enthusiastic category in viewing digital assets in a favourable light (80%). They are followed by financial advisors (47%).
Large Scale Adoption Still a Long Way Ahead
Beside advantages, the respondents also identified risks and vulnerabilities that prevent them from increasing their holding of digital assets. The most important obstacles they named are:
- price volatility,
- lack of clarity in terms of regulation,
- limited track record, and
- lack of fundamentals.
Meanwhile, even Jessop agrees that:
There’s more work to be done as it relates to describing digital assets and blockchain technology in terms that are familiar to them. For example, price volatility, which was a primary concern of survey respondents, may dampen as the underlying custody, trading and financing infrastructure continues to develop in a direction that traditional market participants are familiar with.
However, he also notes that:
Venture investment in the sector continues at a healthy pace, complemented by an increasing number of security token offerings (STOs), and the global regulatory environment remains cautiously constructive.
Approaches to Custody
When it comes to custody, the respondents showed that:
- 18% use a third party custodian;
- 13% are self-custodians;
- 6% use a non-custodial exchange.
Also, over one third of the respondents (37%) prefer to deal with a traditional financial company, and one quarter with a dedicated crypto company.
Fidelity Investments – Ready To Launch Their Own Crypto Trading Platform
The results of the survey represent good news for Fidelity Investments. The company is preparing to launch their own crypto trading platform. A few days ago, the company spokesperson, Arlene Robertson, told Bloomberg:
We currently have a select set of clients we’re supporting on our platform. We will continue to roll out our services over the coming weeks and months based on our clients’ needs, jurisdictions, and other factors. Currently, our service offering is focused on Bitcoin.
And, according to Joe DiPasquale, CEO of BitBull Capital, this development could mean a further push for digital assets.
Fidelity’s institutional crypto offering could, directly and indirectly, increase demand of Bitcoin up to 15%, bringing our price target to Bitcoin to $7000 by the end of May, he told Bitcoin UK.