Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.
The latest Fidelity report shows that direct institutional exposure to cryptocurrencies as well as other crypto derivative products has surged significantly this year across the U.S. and Europe.
The COVID-19 pandemic has created economic havoc worldwide as governments and financial institutions are struggling to make ends meet. With stock markets plummeting over 40% in March 2020 and recession fears rising, institutional investors have increased their focus towards Bitcoin and other cryptocurrencies. Recently, Fidelity Digital Assets has released a new report showing a major jump of institutional participation in the crypto market.
The Fidelity report shows that institutional sentiment for cryptocurrencies has turned positive to a great extent. Also, it says that 80% of the institutional investors surveyed find something appealing about the asset class.
Fidelity conducted this survey by speaking to 774 institutions in the U.S. and Europe. The survey also finds that most institutions are increasing their exposure to cryptocurrencies, with Bitcoin being the top choice. Also, the total number of U.S. investors holding digital assets has jumped to 27% this year, against 22% in 2019.
Furthermore, it shows that 22% of the U.S. institutions invested in crypto and also having exposure to futures. This is a considerable rise considering only 9% of the U.S. investors had exposure to crypto futures in 2019. So out of the 393 institutions surveyed in the U.S, it means 86 institutions are trading crypto futures.
The report states that the “recent market growth in the number of crypto native and incumbent service providers offering cash and physically settled futures contracts” can explain the sudden jump of institutional exposure to crypto futures. This is also very much in tune with our last week’s report which shows that derivatives trading hitting a record $602 billion in May.
Tom Jessop’s Views on Rising Institutional Participation
Tom Jessop, president of Fidelity Digital Assets, said that Europe looks a very supportive and promising market for crypto investments. He added:
“Europe is perhaps more supportive and accommodating. That could “be just things going on in Europe right now, you got negative interest rates in many countries. Bitcoin may look more attractive because there are other assets that aren’t paying [a] return.”
Fidelity Investment is one of the largest asset managers with over $7.9 trillion worth of client assets under administration. Two years back in 2018, the financial giant launched its crypto wing Fidelity Digital Assets. This arm provides custody and trade execution services for institutional investors in the U.S. and Europe.
The latest report from the company also shows that European institutions (45%) showed higher likeliness to hold cryptocurrencies compared to their American counterparts (27%). Commenting on the overall results, Jessop said:
“These results confirm a trend we are seeing in the market towards greater interest in and acceptance of digital assets as a new investable asset class”.
Fidelity Digital Assets director of research Ria Bhutoria says that the unconventional monetary policy by central banks to boost the economy has forced investors to find alternate ways to protect their wealth and pushed them towards cryptocurrencies.