Amid Bitcoin price plunge, majority institutional investors look to increase crypto exposure in two years

Even as uncertainty over Bitcoin price recovery looms, the majority institutional investors and fund managers in cryptocurrency are likely to increase their exposure between now and 2023. A survey conducted by the UK-based investment manager dedicated to the digital assets market Nickel Digital Asset Management between May and June — among institutional investors and fund managers from the US, UK, France, Germany, and the UAE — said that 82 per cent respondents are expected to increase their crypto exposure between now and 2023. 40 per cent, in fact, said they will dramatically increase their crypto holdings.

“Institutional money will flow in crypto from all over the world in the near future because we do have a strong case of another market crash due to rising inflation in major economies. Bitcoin performed better than gold as a hedge against inflation in the past two years and continues to do so. I believe institutions are looking at Bitcoin as a safe hedge against rising inflation, and that’s why they can allocate more capital to it in near future,” Hitesh Malviya, Founder, itsblockchain.com told Financial Express Online.

The primary reason to enhance crypto investments among respondents was the long-term capital growth prospects of cryptocurrencies and digital assets as cited by 58 per cent respondents. This was followed by 38 per cent who said having some exposure to crypto-assets meant they have become more comfortable and confident in holding the asset class. Some 37 per cent maintained that more leading corporates and fund managers investing in crypto assets was also the reason as this also gave them more confidence. For another 34 per cent, an improving regulatory environment was also a key factor in looking to increase their crypto holding.

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“Many of those professional investors with holdings in crypto assets are looking to increase their exposure and this is being driven by several factors including strong market performance during the Covid-19 crisis, more established investors and corporations endorsing the market, and the sector’s infrastructure and regulatory framework improving. These trends will continue to expand,” Anatoly Crachilov, Co-Founder and CEO, Nickel Digital.

An analysis by Nickel Digital at the beginning of June this year showed that 19 listed companies with a market cap of over $1 trillion had around $6.5 billion invested in Bitcoin, having originally spent $4.3 billion buying the cryptocurrency, Crachilov added. The analysis also revealed a staggering $43.2 billion worth of bitcoin held through various bitcoin closed-ended trusts and exchange-traded products.

Bitcoin price has declined by half its mid-April peak of over $64,000. The digital currency was yet to climb back to April level and sustain beyond around $34,000-mark it has been trading at since May last week. Bitcoin’s share in the total crypto market cap has also dropped from nearly 70 per cent in January this year to 44 per cent currently, according to the latest data from CoinMarketCap. The slump has multiple factors contributing to it including China’s crackdown on crypto usage and mining in the country, Elon Musk’s tweets, and increased regulatory scrutiny of digital currency from the US lawmakers.

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