(Kitco News) - One of the biggest talking points for years in the crypto ecosystem has been how the arrival of institutional investors would propel the sector to new heights as the world's largest asset managers piled into the crypto scene.
The severe downturn of 2022 that wiped more than $2 trillion in value from the total cryptocurrency market capitalization put a damper on the expectations of many. Still, new data from Fidelity shows that institutions remain interested in gaining exposure to the nascent asset class.
According to the 2022 Institutional Investor Digital Assets Study conducted by Fidelity Digital Assets, which surveyed 1,052 institutional investors across Asia, Europe and the U.S., more institutions are invested in cryptocurrencies now than they were a year ago when the crypto market was soaring higher.
"Despite market headwinds, adoption of digital assets among institutional investors surveyed increased in both the U.S. (42%) and Europe (67%), a respective 9-point and 11-point change year-over-year," the report from Fidelity said.
Institutional investors in Asia saw a slight decline in adoption over the past year but remain the most accepting of digital assets out of all the regions surveyed, with 69% of respondents reporting an allocation to digital assets.
In total, 58% of those surveyed reported owning digital assets in the first half of 2022, representing a 6% year-over-year increase. Both Bitcoin and digital assets as a whole were viewed positively by 51% of respondents.
Nearly 40% of those surveyed buy digital assets directly, with Bitcoin and Ether being the most popular assets. Other preferences include buying investment products holding crypto (35%), buying investment products holding digital assets companies (30%), and gaining exposure via futures contracts (20%).
Interest in adoption was found to be the highest among crypto hedge funds/venture capital (87%), high-net-worth investors (82%), and financial advisors (73%), which Fidelity suggested: "may be a result of their organizational structures and investment decision-making policies."
Adoption was found to be lower "among family offices, pensions/defined benefit (DB) plans, traditional hedge funds, and endowments and foundations."
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The features determined to be most appealing to institutional investors include the sector's high potential upside, innovative tech play, and enablement of decentralization. Both DeFi participation and yield opportunities saw increased mentions by respondents compared to 2021.
"In total, 74% of investors plan to buy or invest in digital assets in the future, up slightly from 71% in 2021," the report said. The intention to buy was especially pronounced in the U.S., with 74% of high-net-worth investors reporting a "substantial increase in future preference to buy digital assets," up from 31% a year earlier.
The biggest barrier to adoption cited by respondents was price volatility, with 50% indicating that it has been a deciding factor – consistent with the results of Fidelity's 2021 study.
