Nearly Half of Institutional Investors ‘Do Not Understand' Cryptocurrency
Bitcoin has already achieved mainstream acceptance, or at least knowledge, but traditional investors still don’t know about the asset.
Unfortunately, despite Bitcoin has been around for nearly ten years, it is not enough to create an opinion.
A survey by Context Summits at a conference in Miami, Florida late last month showed that nearly half of the more than 400 institutional investors, such as family offices, pension funds, and sovereign wealth fund do not know what cryptocurrencies are. It said that these big institutions do not have an idea what to make of the new asset class.
The survey, conducted between January 31 and February 2, showed that some 27% of the respondents believe that digital currencies are a legitimate asset class, while 26% consider them as frauds.
A majority of these allocators or 71% of them, said they have no plans to invest in crypto-related funds while another 18% said they have not yet decided about its potentials.
Ron Biscardi, co-founder and CEO of Context Capital Partners, commented:
"This survey was conducted immediately prior to a 10% drop in equities prices and a spike in market volatility, so it's prescient that many institutional allocators were already planning significant allocations to alternative investment strategies, which offer investors the potential for downside protection as well as asymmetric returns that are uncorrelated to traditional market risks. We believe this strong demand for alternatives will continue as market participants adjust to the uncertainty ahead."
Crypto funds struggle with widespread acceptance
In a separate report, Autonomous Research said that crypto funds might face a big challenge to gain widespread acceptance from fund managers which oversee the wealth of other people.[G18]
This despite a sharp spike in the number of digital currency-focused hedge funds that were launched last year that totaled 167, or eight times the number recorded in 2016.
Institutional investors wary of Bitcoin
The latest survey by Context Summits reflects our earlier report indicating that institutional investors are refusing to invest in cryptocurrencies because of perception that the asset class is highly volatile and unregulated. In addition, large allocators consider the trading volume of cryptos as still minimal for their standards.
James Butterfill, head of investment strategy at ETF Securities in London, stated:
"For many institutional, discretionary fund managers, those funds wouldn’t get cleared because the big question would be around liquidity.”
While Trevor Greetham at Royal London Asset Management (RLAM) said that cryptocurrencies are “difficult to analyze, wildly volatile and some may be prone to fraud,” while admitting that digital currencies “are probably here to stay.”