Report: Institutions Want Crypto!? You Won’t Believe This!!

Last week Fidelity published a study Which found that 74 of institutional Investors plan on purchasing Cryptocurrency in the future despite the Crypto bear Market Given that Fidelity is one of the Largest asset managers in the world its Findings should be taken seriously and This is just one of many from its recent Study That’s why today I’m going to give you a Summary of Fidelity’s Institutional Investor study explain what it says in Simple terms and tell you what it could Mean for the crypto Market Foreign The study I’ll be summarizing today is Titled quote Institutional Investor Digital asset study key findings it was Written by Fidelity’s digital assets arm And I’ll leave a link to the full study In the description if you’re interested I’ll also quickly note that Fidelity’s Digital assets arm recently allowed Institutional investors to purchase eth And subsequently announced it would be Hiring another 100 employees This arguably proves that the findings Of this study are legit and not just Hopium I also want to quickly point out that Fidelity’s digital asset study Explicitly states on the first slide That it is for quote institutional use

Only Unfortunately for Fidelity the retail Apes have gotten their hands on the Alpha mischief managed Now the study Begins by explaining that Fidelity has been taking surveys of Institutional Investor opinions about Cryptocurrency since 2018. this makes Sense given that this was around the Peak of the previous crypto Market cycle On that note it’s believed that Institutional manipulation of the crypto Market began with the introduction of Bitcoin Futures on the Chicago Mercantile Exchange or CME back in 2017. The release of CME Bitcoin Futures was The then top for BTC and its correlation To tech stocks has been increasing ever Since More about institutional manipulation of The crypto Market using the link in the Description Anyways the authors go on to explain That this study covers the quote Sentiments and behaviors of Institutional investors during the first Half of this year This means that the study does not have Any information about how opinions have Changed during the second half of the Year Now for context the first half of this Year for crypto ended with Terror Collapsing three arrows Capital going

Insolvent and multiple crypto platforms Such as Celsius going bankrupt In other words it was basically the most Bearish period for the crypto Market in The current cycle so far The authors note that a follow-up study Will reveal how institutional investors Felt during the second half of this year It sounds like the report will focus More on institutional perceptions of Crypto adoption as well as the Advancement of crypto related Tech such As defy we will cover it when it comes Out Now the next slide contains a lengthy Quote from Tom Jessup the president of Fidelity digital assets the tldr is that The fundamentals of crypto remain strong Despite the bear Market the quote also Confirms that institutions have become Increasingly involved with the crypto Market in recent years Next the authors give some statistics About the 1052 institutional investors Fidelity surveyed 410 were from the United States 359 were from Europe and 283 were from Asia The authors specify that these Institutions took Fidelity’s survey Between the beginning of January and the End of June the authors also specified That the term Institutional Investor Includes quote financial advisors family

Offices crypto hedge and Venture funds Traditional hedge funds endowments and Foundations as well as Pension funds and Defined benefit plans you can see the Breakdown of these categories here not Sure who needs to hear it but I am not a Financial advisor by the way anywho the Second part of the study concerns the Institutional ownership of and attitude Towards cryptocurrencies the finding in The first slide is surprising because it Reveals that the attitude towards Cryptocurrencies of institutional Investors actually improved between 2021 And 2022 overall the positive perception Of cryptocurrency by institutional Investors increased from around 47 Percent to 57 in the United States it Increased from 29 to 39 in Europe it Increased from 45 to 51 in Asia however Positive perception of cryptocurrency Actually decreased from 63 to below 60 Percent What’s annoying is that the authors Don’t explain why the positive Perception of cryptocurrency in Asia Declined they simply say that the Decline was not significant my best Guess is that terror’s collapse is the Primary cause as it was a South Korean Crypto project with lots of exposure to Asian investors What’s odd is that the United States Seems to be the real outlier here this

Is evident in the percentage of Institutional investors who believe Crypto should be a part of a balanced Portfolio Overall 81 percent believe this is the Case in Asia it’s 84 in Europe it’s 86 But in the United States it’s just 74 Percent When you couple this with the low Positive perception of cryptocurrency Among institutional investors in the United States it suggests that U.S Investors are much more conservative However I suspect that this is a Consequence of the fact that financial Markets are much more developed in the United States Put differently there are more places in The U.S where institutions can park Their Capital if they’re looking for a Big pump this is not the case in Europe And in Asia where markets have been Sagging for the last few years This makes crypto a much more attractive Alternative just my theory Now on the next Slide the authors Examine the change in institutional Perceptions of both Bitcoin and crypto More broadly what’s fascinating is that Institutional investors seem to have a More positive perception of Bitcoin Compared to altcoins in 2021 This might have something to do with the Runaway retail speculation we saw with

Meme coins like Dogecoin and the long List of coins that I won’t even Start to name there were scams and rug Pulls left and right and I reckon that Left bad taste in the mouths and Portfolios of institutional investors This year the perception of Bitcoin and Altcoins is almost the same and the Perception of both has become more Positive this suggests two things First that institutional investors are Increasingly interested in altcoins and Second that they’re increasingly seeing Crypto as a legitimate asset class Funnily enough this is perfectly Portrayed by the recent actions of Fidelity and BlackRock which is the World’s largest asset manager as I Mentioned earlier Fidelity recently Opened its doors to eth investing and it Also allowed its customers to invest in BTC as part of their pensions back in April Meanwhile BlackRock officially opened Its doors to BTC with the help of Coinbase back in August to my mind it’s Only a matter of time before BlackRock Opens its doors to eth too Now this will be incredibly bullish but Also concerning as BlackRock could Easily buy up enough eth to take control Of ethereum via staking more about Blackrock in the description I digress The next part is where things get

Interesting because the authors provide A detailed breakdown of the different Types of institutional investors and Their familiarity with crypto their Perception of crypto and their Allocation to crypto the image is quite Small so I’ll go through each type and Give you my thoughts In the first place we have crypto hedge Funds and crypto VC funds not Surprisingly 94 of them are familiar With cryptocurrency this makes me wonder How the other six percent are getting by But let’s not go there 79 have a positive perception of crypto But only 12 have invested in crypto for More than two years this shockingly low Statistic is probably due to the fact That many of these crypto hedge funds And VC funds were established during the Current crypto Market cycle sadly an Explanation is not provided by the Authors note that 87 of these Institutional investors are currently Buying crypto In second place we have high net worth Investors 82 percent of whom are Currently buying crypto what’s more Telling is that almost 50 percent of High net worth investors have been Allocating to crypto for more than two Years This is much higher than any other type Of Institutional Investor

Eighty percent of high net worth Investors consider themselves to be Familiar with crypto while 74 of them Have a positive perception of the asset Class I’ll reiterate that it’s Interesting to see the slight disconnect Between the familiarity perception and Allocation of these institutional Investors in third place we have Financial advisors which is again not a Category of which I am a member Despite this fact financial advisors Seem to be the most bullish on crypto This is because 73 of them are currently Buying yet only half that amount were Buying more than two years ago that said Fewer than 60 of financial advisors have A positive perception of crypto this Suggests that many of them got wrecked In H1 You’d think they’d know better given That their familiarity with crypto sits At 72 which is almost the same as their 73 allocation a bit of overconfidence Perhaps Now in fourth place we have family Offices AKA Rich families who are too Lazy to do their investing themselves Only 37 of family offices currently have Exposure to crypto which is a bit Surprising I could swear I saw a load of Headlines about family officers Allocating heavily to crypto not long Ago

In any case 25 of family officers have Been investing in crypto for more than Two years and 54 of them consider Themselves to be familiar with crypto 38 Of them currently have a positive Opinion of crypto which is consistent With their 38 allocation emotional Investors am I right Jokes Aside the last three categories of Institutional investors Fidelity Surveyed are traditional hedge funds Endowments and Foundations and pensions As expected all three have incredibly Low allocations to crypto aren’t all That familiar with the asset class and Don’t feel too good about it now this Low adoption appears easy enough to Explain traditional hedge funds are Probably bifurcated I.E separated from Their crypto hedge fund operations Endowments and Foundations probably Prefer to keep their treasuries in cash And pensions typically have strict Restrictions on what assets they can buy As for the negative perception of Cryptocurrency most of this can probably Be explained by the fact that many of The people working for these kinds of Institutions are old and extremely Conservative they’re probably all in on Government bonds just like the Stablecoin issuers that are slowly Taking over crypto more about that in The description

Anyhow Fidelity also asked institutional Investors about why they’re interested In cryptocurrencies obviously the number One reason was the upside potential the Second reason was for the technology and The third was because of Decentralization The fourth reason was the one that Really stuck out to me however because It’s quote free from government Intervention Now I imagine institutional investors With lots of capital are hyper aware That Fiat currencies are losing value by The day and any assets they custody with Third parties don’t really belong to Them by contrast most cryptocurrencies Have a fixed Supply or at least Pre-programmed Supply dynamics that Can’t be changed almost all Cryptocurrencies are self-custodial Meaning that you have total ownership of Your assets and can decide how and when They’re spent this is the true meaning Of Financial Freedom Now the fifth reason was similarly Striking because it was crypto’s Uncorrelation to other assets although This was the fifth reason institutional Investors gave for buying crypto the Percentage doing so actually tumbled From 37 to 25 in 2022. this is because Cryptos correlation with stocks has gone Up since 2021. if you’ve watched any of

Our videos about the Federal Reserve You’ll know that the collective Correlation of almost all asset classes Is ultimately due to the fed’s interest Rate increases these have effectively Been sucking money out of all assets and Into the US dollar causing all other Assets to crash now despite crypto’s Poor performance inflation hedge was Still the sixth most cited reason for Allocating to crypto getting exposure to Defy was tied for sixth place as was the Opportunity for yield within D5 Protocols I imagine most of those yields have Dried up by now The last two reasons why institutions Said they invested in crypto was because Of Arbitrage opportunities and Censorship resistance the former again Relates to defy and the latter again Relates to the separation of money and State which is the end game of Cryptocurrency And then the authors dropped the Statistic that made the headlines quote In total 74 of investors plan to buy or Invest in digital Assets in the future Up slightly from 71 in 2021 As you can hopefully see the biggest Gain was amongst High net worth Investors from 70 to 86 percent they Know what’s up Crypto hedge funds are also Keener on

Investing in crypto in the future as are Financial advisors which is predictable Given the previous statistics The opinion of family offices hasn’t Changed and sits at 76 this is still Above the aggregate average of future Purchase preference so that’s promising The aggregate average of 74 is of course Being dragged down by traditional hedge Funds which are less Keen to get more Exposure to crypto along with Pension Funds endowments and Foundations plan on Maintaining the same stance which is Negligible in the grand scheme of things Now the next part of fidelity study is Probably my favorite and that’s because It covers all the reasons why Institutional investors are hesitant to Get into crypto the number one reason is Price volatility which is ironic given That this is basically the exact same Number one reason why institutions are Investing in crypto the irony seems to Be especially pronounced among Institutional investors in the United States with nearly 60 percent saying That volatility is the primary obstacle To investment That said this is the number one reason Given by institutions across all regions With Europe at around 50 and Asia at Just under 40 percent The second most cited reason was a lack Of fundamentals to measure the value of

A coin or token I can certainly Sympathize with this one the valuation Of most cryptocurrencies makes next to No sense when you consider their supply And demand Dynamics this is true for Both over and under valuation The third most cited reason was security Concerns by institutions which is Confusing given that regulation and Custody concerns are listed separately Note that institutional investors in the United States do in fact seem to be the Most conservative as they scored the Highest for all these obstacles now the Fourth most cited reason is as ironic as The first as it relates to Market Manipulation you’ll recall that Institutional investors could be Responsible for this Market manipulation But I suppose it makes sense if they’re Scared of each other in this regard the Complexity of crypto security concerns By clients and the regulatory Classification of certain Cryptocurrencies are all tied as the Fifth most cited obstacle to crypto Investing by institutions The authors highlighted regulatory Classification which suggests that it’s An especially pressing concern The authors also put an asterisk next to Concerns about smart contracts concerns About self-custody environmental Concerns and minimum investment

Threshold this is because these Obstacles are new for 2022 and this is Frustrating because the environmental Impact of crypto is factually Insignificant you can get the facts About that using the links in the Description anywho just for the sake of Time I’ll fire off the last dozen or so Obstacles to allocation identified by Crypto investors crypto is too new Crypto can’t be understood by the Institution no valuation models no Crypto regulated custodians tax Uncertainty that one’s a classic Concerns about private Key Management Underdeveloped Market infrastructure Limited use cases limited educational Resources have they not heard of coin Bureau difficult to hedge lack of Clarity around General crypto regulation And transactions are irreversible Institutional investors better learn to Live with that last one now the authors Go on to assess whether institutional Investors believe crypto should be a Part of their portfolios over 80 percent Said yes overall but the United States Is an outlier yet again with 26 of Institutional investors saying crypto Should not be a part of their portfolios The last thing the authors examine is The appeal of institutional investment Vehicles such as ETFs and the regional Differences here are quite revealing in

The United States and Asia a spot Bitcoin ETF is seen as the most Appealing institutional investment Vehicle too bad the US doesn’t have one Yeah In Europe however the most appealing Institutional investment vehicle is an Actively managed multi-digital asset Fund AKA an investment vehicle with Multiple cryptocurrencies in it This kind of investment vehicle has Almost the same appeal as one which Accrues interest iea staked crypto ETF Now I suspect the appeal of a staked Crypto ETF in Europe has to do with the Fact that interest rates in the Eurozone Were negative until fairly recently this Meant there was no way of earning an Attractive yield and staking crypto was Probably one of the best if not the only Alternative that and D5 so this brings Me to the big question and that’s what Fidelity study means for the crypto Market well I’ll start by reminding you That Fidelity’s institutional findings Only apply to the first half of this Year and well a lot has changed since Then that said the fact that Institutional investors were this Bullish on crypto when the crypto Market Was collapsing really does say a lot Then again it’s not clear when Fidelity Surveyed most of these institutional Investors it’s possible that it did so

Prior to terrorist collapse and the Resulting chaos in the market Regardless these findings are extremely Reassuring institutional investors are Slowly but surely starting to understand That crypto has some serious unique Value propositions this is evident in The elements about the industry that Appeal to them such as censorship Resistance decentralization and Innovation Fidelity’s findings also send a message To the crypto industry about which Elements need to be improved I would go As far as to say that they present a Huge opportunity for those prospective Crypto companies that choose to address The concerns of these institutions this Is especially relevant to the obstacles That institutional investors see when Allocating to cryptocurrency it looks Like there’s a lot of money to be made From finding ways of valuing specific Crypto projects and even just explaining How they work to institutions and their Clients The only wild card in this equation is All the insanity we’ve seen so far in The second half of this year Q3 earnings Are starting to come in and it’s clear That the stock market is in trouble the Housing market has been crashing too More about that in the description and Even markets for government debt are

Starting to wobble outside of the USA As winter approaches this volatility Will only increase due to energy Shortages and other uncertainties around The world I don’t imagine institutional investors Will be nearly as bullish about crypto If countries put a pause on Bitcoin Mining as the EU recently said it would In response to an energy crisis interest Rates are rising too and this is Starting to make government debt a more Appealing asset to hold While bonds haven’t been the safe haven They’ve historically been some macro Analysts believe that they will decouple From the stock market if and when the Global economy enters a deep recession At that point we will probably see lots Of institutional liquidity pour out of Other assets including cryptocurrency And it will probably be another year or More before they start raising their Risk tolerance when that risk tolerance Does come back though it’s clear that Crypto will be the place to be And that’s all for today’s video about Fidelity’s Institutional Investor study If you found it as informative as I did Smash that like button to let me know if You want to make sure you don’t miss the Next video subscribe to the channel and Ping that notification Bell before you Go if you’re wondering where to head

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