The funds continue to invest in bitcoin and Ethereum despite the downturn in the cryptocurrency market. They took advantage of the lower prices to acquire these assets in the hope that there would eventually be a rebound. Perceptions of cryptocurrencies have also improved year after year.
How do institutional investors behave in a bear market?
No study had ever evaluated the behavior of institutional investors when the cryptocurrency market is bearish. These institutional players began investing in this asset class after Covid, as they continue to support Bitcoin and Ethereum (their favorite cryptocurrencies), according to a study by Fidelity Digital Assets, which interviewed a thousand investors in Europe, the US and Asia. .
Since 2018, Fidelity Digital Assets has conducted an annual study to understand how institutional investors view and approach digital assets, including cryptocurrencies. The official announcement was made on October 27, 2022: the results of the research for the year 2022 were published.
The study focuses on the first half of 2022, when major crypto assets had not yet declined, but had clearly begun to decline. Despite these headwinds, nearly 60% of institutional investors surveyed say they invested in digital assets during this period.
Year-over-year adoption increased 9 percentage points (42%) in the United States and 11 percentage points (67%) in Europe, but slightly decreased in Asia (69%), where representation within the market it is already the highest.
“Although markets have faced headwinds in recent months, we believe digital asset fundamentals remain solid and the institutionalization of the market in recent years has allowed them to withstand recent events.” said Tom Jessop, director of Fidelity’s digital assets unit.
Another important statistic on the long-term view of institutional investors in the market: nearly three-quarters of investors (or 74%) said they want to buy digital currencies in the future.
For those who remain skeptical of cryptocurrencies and even those who invest in cryptocurrencies, market volatility remains a major barrier to adoption. They also point to the complexity, valuation, and risks of manipulating these assets as other obstacles to adoption.
The volatility and market manipulation are frightening
To date, the weight of institutional players in the cryptocurrency space is unknown. Although their number has increased compared to last year, it is impossible to say how much cryptocurrency wealth belongs to the institutional.
Banks are known to own only 0.01% of the total value, or $ 9.4 billion, in cryptocurrencies.
Most institutional investors surveyed agree on one thing: Price volatility is the biggest obstacle to digital asset adoption. While some have also mentioned the risks associated with the complexity of the markets, others have pointed to the risks associated with market valuations. We are talking about the risk of paying a high price for assets.
Another important data collected during the research conducted by Fidelity Digital Assets in 2022: more than a third of investors are concerned about the risk of market manipulation, preventing them from fully accepting cryptocurrencies.
That doesn’t stop many companies, including MicroStrategy and Tesla, from holding cryptocurrencies in their wallets. In the first case, MSTR continues to accumulate Bitcoin despite the bear market. Michael Saylor’s former company holds no less than 130,000 bitcoins. The Grayscale Trust, on the other hand, manages more than 500,000 bitcoins.
The Fidelity Digital Assets 2022 study isn’t just about adopting cryptocurrencies and other digital assets. It also addresses investor perceptions of digital assets. A full summary of the study’s key findings is now publicly available.