Institutional investors remain committed to digital assets despite a sharp drop in valuations and the prospect of a prolonged “crypto winter”, according to the new to research sponsored by Coinbase.
The survey, which surveyed 140 institutional investors managing a collective $2.6 billion, finds that 62% of respondents who currently invest in digital assets have increased their allocations in the past 12 months, while only 12% reduced their positions.
The majority of investors (58%) plan to increase their allocations over the next three years, reports the study, which was conducted by Institutional Investor Custom Research Lab. About six in 10 respondents say they currently use, or plan to use, a buy and hold strategy – another long-term uptrend indicator.
Institutional interest in crypto and blockchain technology increased rapidly during the Covid-19 pandemic but was rocked in 2022 by a sharp price drop and a series of failures among major crypto lenders, investors and exchanges.
The crypto industry is still reeling from the FTX collapsea leading crypto exchange, which filed for bankruptcy in mid-November with 130 associated entities, including trading firm Alameda Research.
The FTX fallout continued this week with news that BlockFi, a crypto lender, filed for bankruptcy protection in the United States. The filing details an outstanding loan to FTX US of $275 million.
But the investor survey, conducted before FTX’s public implosion, reveals a positive long-term outlook for the crypto. About seven in 10 respondents say they believe digital assets are here to stay. The figure rises to 86% among those who have already invested in crypto, while it rises to 64% among those considering investing.
When it comes to concerns, 52% of investors say the top concern with digital assets is the uncertain regulatory environment, followed by volatility (48%) and the risk of market manipulation (36%).
The bankruptcy of FTX and other crypto firms has led to renewed calls for greater regulation of digital assets.
“The recent failure of a major cryptocurrency exchange and the resulting unfortunate impact on holders and investors of crypto assets demonstrates the need for more effective oversight of the cryptocurrency markets,” said Janet Yellen, US Treasury Secretary, in a statement released on November 16.