Institutional investors see further prices increases, plan to increase allocations

Institutional investor sentiment has recovered a year on from volatility driven by a litany of crypto bankruptcies.
Large investors are preparing to increase investments in crypto as they see prices moving higher in the next year.

Happy Thanksgiving to our readers in the US!

A recent report by Coinbase Institutional found that large US investors have turned positive on crypto again after shunning assets in 2022.

Let’s dig in!

A year is a long time

One year on from the collapse of crypto exchange FTX, and the spate of crypto bankruptcies that preceded it, institutional investors are ready to dive back into crypto.

Coinbase Institutional surveyed 250 US-based institutional decision makers, from hedge funds and asset managers, between October and November — the results suggest the tide is turning.

“A year removed from shocks to the crypto ecosystem, institutional investors are committed to crypto, actively investing in the space, and optimistic about the future,” Coinbase said in its report on the survey.

Over 150 of the investors surveyed, who already hold crypto investments, expect to increase crypto allocations in the next three years, according to the report.

While 45% of institutional investors surveyed without any crypto allocations expect to begin buying in the next three years.

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More than half of the survey participants expect prices to move higher in the next 12 months. This is a marked increase on the same survey last year, when just 8% said prices would move higher.

Institutional investors are gaining exposure to crypto through a “variety of products,” Coinbase said.

While there isn’t a “clear preferred method to gain crypto exposure,” these investors appear to favour spot crypto and crypto lending – the most frequently selected methods from respondents with crypto investments.

Asset performance takes care of everything. Higher trending prices are likely to spur momentum that increases investor interest.

Investors ranked performance-based metrics as the top three reasons to invest – citing asset appreciation, outperformance, and the lack of other portfolio opportunities.

Volatility still poses a barrier to investing, with 63% of respondents citing this as the main concern when investing in cryptocurrency.

Environmental, social and governance concerns also play a role, with 44% of respondents citing it as a concern.

Uncertainty around regulations weighed on investors in 2022, with 52% of institutional investors citing concerns about it, but this figure fell to 30% in 2023.

The survey came before a slew of regulatory developments this week, the most notable of which saw Binance agree to pay $4.3 billion to US authorities for breaching the Bank Secrecy Act, among other things. The US Securities and Exchange Commission also sued Kraken, accusing it of co-mingling customer funds.

Crypto market movers

Bitcoin is up 1% to around $37,000 over the past day.
Ethereum was up about 0.2% in the same period, trading for about $2,000.
Altcoins experienced sharper increases. Uniswap’s UNI token is up 9%, while Solana’s SOL gained 3%.

What we’re reading

‘Strong’ Bitcoin sentiment drives $2.2bn in bullish bets amid record volume — DL News
South Korea To Launch CBDC Test With 100,000 Citizens — Milk Road
U.S. Prosecutors Urge Court to Keep Ex-Binance CEO CZ in Country Until Sentencing — Unchained
A $200,000 Pet-Rock NFT Shows How Crypto Is Relapsing Into FOMO — Bloomberg
Kraken Co-Founder Jesse Powell Calls For Self-Policing Amidst Binance Turmoil — Milk Road

Adam Morgan McCarthy is DL News’ London-based Markets Correspondent. Got a tip? Reach out at adam@dlnews.com.