Despite the bearish market sentiments, 62% of cryptocurrency investors increased their allocations in the last year, according to a Coinbase-sponsored institutional investor study.
According to the survey, only 12% of cryptocurrency investors elected to reduce their holdings. The research includes the aftermath of the Three Arrows Capital collapse that sent shockwaves across the sector earlier this year. And at this time again, FTX’s bankruptcy has unsettled other enterprises in the area.
Investors see a weak market as an opportunity
This poll includes 140 US-based institutional investors who manage about $2.6 trillion in assets. Notably, institutional investors raised their holdings during the crypto winter. At this time, many are reportedly taking advantage of the opportunity to make long-term investments.
The survey results show that differential performance is the top reason investors want to invest in cryptocurrencies. In addition, many expressed a desire to allocate to cutting-edge technology. This may be why there has been an upsurge in crypto investments.
According to the report, 58% of investors anticipate increasing their allocations during the following three years. Most investors (59%) currently employ or intend to operate a buy-and-hold strategy.
At the time of writing, the global cryptocurrency market cap was just under $860 billion. This is a major downturn from 2021’s peak of over $2 trillion. Bitcoin was hovering under $16,500, wiping most of the market’s capitalization. However, the report highlights the elevated volatility as a desirable opportunity for these institutional investors to produce additional profits or alpha.
Long-term crypto predictions remain positive
Cathie Wood of Ark Invest is still predicting that Bitcoin will reach $1 million by 2030. In a recent interview with Bloomberg, the CEO said, “Bitcoin is coming out smelling like a rose, one thing that will be delayed perhaps the institutions stepping back, once they actually do the homework and see what’s happened here, I think they’d be more comfortable moving into Bitcoin and Ether as a starting point.”
The markets are currently experiencing “deeply negative sentiments,” according to CoinShares’ latest weekly report. Despite that, it reported inflows of $44 million over the week, with the majority of the investments coming from short-term investment products.
The survey reveals that people continue to have a favorable attitude toward 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% are planning to. However, institutional investors recognized regulatory compliance as a critical driver of future growth.
Regulations to be a key driver in the growth
Regulation is also anticipated to play a crucial role in the industry’s future, according to the Official Monetary and Financial Institutions Forum, an independent think tank for economic and investment policy.
Starling Bank, situated in the UK, 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 collapses.
Policy advisor and former head of the Federal Deposit Insurance Corporation, Sheila Bair, told the Financial Times that regulators should devise a policy for the sector. Bair advised them, “Set a framework, publicly announce it, and implement it through rule changes and policy announcements. But get on with it because more and more people are getting hurt.”