Fidelity Survey Shows Institutional Investors Warming Up to Crypto Assets
Fidelity Investments made forays into the digital asset sector through mining, but now sees opportunities for direct buying on behalf of institutional investors.
Fidelity Investments discovered that as much as half of institutional investors are open to holding digital assets in their portfolios, a recently commissioned survey shows. Fidelity has gauged the readiness and risk profile for pension funds, family offices, hedge funds, endowments, and foundations, reported Bloomberg.
The survey covered the opinions of 441 institutional investors, who could make decisions on behalf of personal investors, queried from November to February. As much as 57% of the investment entities stated readiness to buy digital assets directly, while as much as 74% stated they may add derivative products to their portfolios.
The survey participants still shared some skepticism about the volatility of prices, as well as regulatory uncertainty, and an obscure trading and price discovery mechanism. Tom Jessop, the President of Fidelity, pointed out the survey was performed during the lowest moment of the bear market.
Jessop sees digital assets as a form of currencies, and direct ownership, instead of using derivatives, seems counter-intuitive.
“That’s interesting because I’d argue that no one owns dollars or euros in a fund,” Jessop said in an interview.
Fidelity Investment has mined Bitcoin since 2015 and more recently added a custodial service for digital assets. Institutional investors have been aware of the risks of storing digital assets, and firms attempting to draw them in are starting to offer security mechanisms going beyond personal storage. Coinbase and Bakkt are offering various forms of custodial storage for digital assets.
Fidelity Digital Assets, the cryptocurrency arm of the investment firm, aims to offer an experience of heightened trust, based on a traditional brand in the financial sector.
"People are relying on the institutions they’ve done business with for a long time to fulfill their objectives and needs," he said. "I’m not trying to throw shade on anybody else, but it’s up to the clients to decide,” said Abigail Johnson, CEO of Fidelity.
Pure digital asset exchanges have proven to be problematic, with flaws ranging from hacking attacks and thefts to lack of access to banking services. Recently, it became clear that the usage of ad-hoc shadow banking on behalf of Bitfinex may have led to the freezing of $850 million in various jurisdictions, including the USA. Risk-averse institutional investors may not want to be exposed to such dangers.