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A survey from Fidelity Digital Assets has revealed that seven in ten institutional investors from around the world, including advisors, family offices, pensions, hedge funds, and endowments, plan to buy or invest in digital assets within the next five years. Additionally, more than 90% of those interested in the industry say they expect to have an allocation of digital assets in their institutions' or clients’ portfolios in the next five years.
But that is not all. More than half of respondents across the U.S, Europe and Asia currently invest in digital assets, with adoption rates highest in Asia (71%). 56% of European institutions and 33% of U.S institutions now hold investments in the asset class, up from 45% and 27%, respectively, last year.
“The pandemic – and fiscal and monetary measures in response to it – has been a catalyst for many institutional investors to define their investment thesis and operationalize it.” says Tom Jessop, President of Fidelity Digital Assets.
However, there is some fine print to these results. The survey, which included 1,100 respondents across the U.S (408), Europe (393) and Asia (299), was conducted at the very height of the recent crypto bull market (December 2, 2020-April 2, 2021). Bitcoin would go on to reach its all-time high of $64,654 on April 14th, coinciding with leading bitcoin exchange Coinbase going public. Since that time bitcoin, ether, and the broader crypto market has lost approximately 50% of its value. However, a Fidelity spokesperson told Forbes, “we haven’t seen a material change in demand during the drawdown given institutions tend to hold a long-term view and are experienced in managing through cycles.”
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Additionally, it is worth noting that not every respondent necessarily uses the same internal definition for the term ‘digital asset’. When asked about how it was presented in the survey (the full document will not be released until September), a Fidelity spokesperson told Forbes, “It was defined as assets that are issued and transferred electronically, and bitcoin and Ethereum were given as examples. Re: allocations, exposure to digital asset companies (e.g., common stock) could be considered as part of a portfolio allocation in addition to cryptocurrencies.”
Finally, while interest remains high there are still concerns that could impede further adoption, with the largest being price volatility. Another is the lack of fundamentals to gauge value as well as worries about market manipulation. On the positive side, past concerns about technological complexity for institutions and immature market infrastructure seems to have dwindled.