Tuesday 28 September 2021 11:00 am

Exclusive: Institutional investors and wealth managers increasingly 'test' crypto market

More than six in ten institutional investors and wealth managers from the US, UK, France, Germany, and the UAE that currently don’t have any exposure to cryptocurrencies and digital assets, expect to invest in these for the first time within the next year, according to new data, shared exclusively with City A.M. today.

In most cases this will just be professional investors ‘testing’ the market in terms of how it works, its infrastructure and liquidity rather than serious investments, according to investment manager Nickel Digital Asset Management, which conducted the study.

Reasons to invest

The main reason given for investing in digital assets for the first time is the long-term capital growth prospects of cryptocurrencies and digital assets, a view cited by 47 per cent of respondents. 

This is followed by 44 per cent who said it is because more corporates and fund managers are investing in cryptocurrencies, which gives them greater confidence in the asset class, and 41 per cent who said it is because the regulatory environment is improving.  

One in three (34 per cent) said it is because it is a good hedge against inflation.

Reason for investing % of investors*
Capital growth in cryptocurrencies47%
More leading corporates and fund managers are investing in cryptoassets44%
The regulatory environment for the sector is improving 41%
They provide a good hedge against inflation34%
They offer strong portfolio diversification benefits28%
There will be more cryptoassets focused investment vehicles to choose from27%
Custodial services/security around the holding of cryptocurrencies is improving14%
Liquidity of the market is increasingly being established10%

* Percentage of institutional investors interviewed who don’t currently have exposure to cryptoassets who said this is why they will invest for the first time

“The cryptoassets market is becoming more mainstream in the institutional and wealth management sectors,” commented Henry Howell, Head of Business Development of Nickel Digital.

Howell told City A.M.: “This is being driven by several factors including strong market performance during the Covid crisis, more established investors and corporations endorsing the market, and the sector’s infrastructure and regulatory framework improving.”