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71% of Institutional Investors Plan to Adopt Digital Assets: Fidelity

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What You Need to Know

  • Of the firms who plan to adopt them, 90% plan to have an allocation in portfolios by 2026, Fidelity Digital Assets found.
  • Adoption rates are higher in Asia, at 71%, but 56% of European institutions and 33% of U.S. institutions hold digital investments.
  • Price volatility remains the main barrier to adoption, followed by lack of fundamentals to gauge value and market manipulation worries.

Seventy-one percent of institutional investors in a new survey said they expect to buy or invest in digital assets in the future, and more than 90% of those interested in digital assets expect to have an allocation in their institution’s or clients’ portfolios by 2026, Fidelity Digital Assets reported Tuesday.

Portfolio allocations to digital assets may include direct investments in cryptocurrencies or exposure through investment products and common stock of crypto companies.

This forecast indicates a continued acceleration in adoption over the next several years, according to the report. Fifty-two percent of institutions surveyed across the U.S., Asia and Europe currently invest in digital assets. 

“The increased interest and adoption we’re seeing is a reflection of the growing sophistication and institutionalization of the digital assets ecosystem,” Tom Jessop, president of Fidelity Digital Assets, said in a statement. 

“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.” 

The survey, conducted between Dec. 2 and April 2, involved 408 institutional investors in the U.S., 393 in Europe and 299 in Asia, among them high-net-worth investors, family offices, digital and traditional hedge funds, institutional investors, financial advisors, and endowments and foundations. 

The survey results showed that the vast majority of investors find digital assets’ high potential upside and low correlation to other assets appealing, with the potential upside gaining 16 points among U.S. investors since 2019 and 13 points among Europeans since 2020.

A bipartisan bill recently introduced in the U.S. House of Representatives would classify digital tokens and other crypto-assets as investment contract assets rather than securities subject to regulation under the Securities Act of 1933 and 1934.

Adoption Hurdles 

Their enthusiasm aside, institutional investors also expressed concerns about digital assets. Price volatility is still the main barrier to adoption, followed by lack of fundamentals to gauge value and worries about market manipulation. 

At the same time, investors reported less concern about complexity for institutions and market infrastructure than previously. 

“The expectation that the vast majority of institutions will have some exposure to digital assets by 2026 shows that investors have a deeper understanding of the asset class and have progressed in the three-phase journey from education to adoption,” Jessop said. 

Today, some 9 in 10 institutional investors believe digital assets should be part of a portfolio, according to Fidelity Digital Assets. This belief is strongest in Asia, but 77% of European and 69% of U.S. institutions are in agreement, up from 67% and 64% in 2020. 

As adoption increases, institutional investors are expecting more services from digital asset custodians. Sixty-three percent of survey participants said they want a custodian that offers electronic trading and 56% want market data and analytics, with a greater emphasis on these services among U.S. institutions. 

Still, security and safety remain the most important features of a custodial relationship, having grown in importance in both Europe and the U.S., according to the report.