Despite bearish market sentiment, 62% of cryptocurrency investors have increased their allocations over the past year, according to a Coinbase-sponsored study of institutional investors.
According to the survey, only 12% of cryptocurrency investors chose to reduce their holdings. The research includes the aftermath of the collapse of Three Arrows Capital which sent shockwaves through the sector earlier this year. And again, the bankruptcy of FTX destabilized other companies in the region.
Investors see a weak market as an opportunity
This survey includes 140 US-based institutional investors who manage approximately $2.6 trillion in assets. In particular, institutional investors increased their holdings during the crypto winter. At present, many would take the opportunity to make long-term investments.
The survey results show that differential performance is the main reason why investors want to invest in cryptocurrencies. In addition, many expressed a desire to allocate advanced technology. This may be the reason why there has been an upsurge in crypto investments.
According to the report, 58% of investors plan to increase their allocations over the next three years. Most investors (59%) currently use or intend to use a buy and hold strategy.
At the time of writing, the global cryptocurrency market cap is just under $860 billion. This is a major downturn from the 2021 peak of over $2 trillion. Bitcoin hovered below $16,500, wiping out most of the market capitalization. However, the report highlights the high level volatility as a desirable opportunity for these institutional investors to generate additional earnings or alpha.
Long-Term Crypto Predictions Remain Positive
Ark Invest’s Cathie Wood is still predicting that Bitcoin will hit $1 million by 2030. In a recent interview with Bloomberg, the CEO said“Bitcoin comes out smelling like a rose one thing that will be delayed maybe institutions back off once they do their homework and see what happened here I think they would be more on the lookout comfortable moving to Bitcoin and Ether as a starting point.”
Markets are experiencing “deeply negative sentiment” right now, according to CoinShares’ latest weekly report. Despite this, it reported inflows of $44 million during the week, with the majority of investments coming from short-term investment products.
The survey finds that people continue to have a positive attitude towards digital assets, with 72% of respondents agreeing that they are here to stay. Notably, 86% of these people have already invested in cryptocurrencies and 64% plan to do so. However, institutional investors have recognized regulatory compliance as a key driver for future growth.
Regulation will be a key driver of growth
Regulation is also expected to play a crucial role in the future of the industry, according at the Official Forum of Monetary and Financial Institutions, an independent think tank on economic and investment policy.
Starling Bank, located in the United Kingdom, recently tightened its regulations on cryptocurrency transfers while stopping all incoming and outgoing payments from exchanges. Therefore, new rules could make or break the digital asset class in the wake of crypto meltdowns.
Sheila Bair, policy adviser and former head of the Federal Deposit Insurance Corporation, Told the Financial Times that regulators should develop policy for the sector. Bair advised them, “Establish a framework, announce it publicly, and implement it through rule changes and policy announcements. But keep going because more and more people are getting hurt.
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