Institutional Investors are Increasingly Focusing on Cryptocurrencies and Digital Assets
A new survey of institutional investors and wealth managers from the US, UK, France, Germany, and the UAE who currently have exposure to cryptocurrencies and digital assets, reveals that 82% expect to increase their exposure between now and 2023. Four out of ten say they will dramatically increase their holdings. Only 1% said they would sell their entire holdings, and just 7% said they would reduce their exposure.
However, Nickel Digital Asset Management (Nickel), Europe’s leading regulated and award-winning investment manager dedicated to the digital assets market, which conducted the study, says in most cases institutional investors with holdings in Bitcoin and other cryptocurrencies have very low levels of exposure as many have just been testing to market to see how it works.
The main reason given for investing more in digital assets is the long-term capital growth prospects of cryptocurrencies and digital assets – the view cited by 58% of respondents. This is followed by 38% who said it is because having some exposure to cryptoassets means they have become more comfortable and confident in holding the asset class. Some 37% cited more leading corporates and fund managers investing in cryptoassets as a reason as this too is giving them more confidence, and 34% said an improving regulatory environment was also a key factor in wanting to increase their allocation.
Anatoly Crachilov, co-Founder and CEO of Nickel Digital, commented:
“The number of institutional investors and corporates holding Bitcoin and other cryptoassets is growing and their confidence in the asset class is also increasing. Our analysis (2) at the start of June this year revealed that 19 listed companies with a market cap of over $1 trillion had around $6.5 billion invested in Bitcoin, having originally spent $4.3 billion buying the cryptocurrency. We also found a staggering $43.2 billion worth of bitcoin is held through various bitcoin closed-ended trusts and exchange traded products.
“Many of those professional investors with holdings in cryptoassets are looking to increase their exposure and this is being driven by several factors including strong market performance during the Covid-19 crisis, more established investors and corporations endorsing the market, and the sector’s infrastructure and regulatory framework improving. These trends will continue to expand.”
Nickel Digital’s infrastructure is designed to offer various access points to the crypto market
Nickel currently has four funds investing in the digital asset space. Its market-neutral Digital Asset Arbitrage Fund pursues an absolute return strategy without expressing directional views on the underlying cryptoassets market. It exploits market inefficiencies and price dislocations and harnesses swings of volatility to deliver consistent positive returns within a strictly defined risk management framework. Since inception 24 months ago, the fund has delivered strong risk-adjusted returns with no drawdown months and Sharpe of over 4.
The Nickel Diversified Alpha (Digital Factors) Fund is a non-directional multi-strategy fund which wraps a portfolio of attractive but hard-to-access and capacity-constrained strategies into a single, investible fund. Among the strategies it deploys are high-frequency market making, statistical arbitrage, relative value, trend following, and momentum.
Digital Leaders DeFi Fund is designed to capture the growth potential of the broader digital assets space outside Bitcoin, also called Altcoin space, spotting early winners in Layer 1 protocols and Decentralised Finance, the area of greatest financial innovation. The fund is an actively-managed research-driven vehicle.
Nickel’s Digital Gold Institutional Fund, a Bitcoin tracker, provides secure, efficient, transparent, and liquid access to physically allocated Bitcoin. It delivers institutional-grade precision of trade execution available 7 days a week with one of the industry’s lowest expense ratios.
Defensive Bitcoin Fund aims to offer institutional-grade exposure to Bitcoin while managing downside volatility of this exposure. Nickel will apply an overlay of derivative instruments to reduce downside volatility while aiming to capture the majority of the upside. Nickel aims to launch the fund in August 2021.