Will crypto keep on going to the moon – or will it go the way of tulip mania?
That’s just one of many questions that old-fashioned traditional investors have been asking ever since the advent of the blockchain revolution.
But now that we’re more than a decade into the story of crypto, what are the institutions saying about the world-changing new financial sector that’s proved more successful than dyed-in-the-wool banker types could have ever predicted?
Few executives would know better than those working at the investment firm Fidelity, which is as institutional as it comes. Founded in 1946, Fidelity is the third-largest asset management firm in the world, managing almost $5 trillion in assets.
Fidelity Digital Assets President Tom Jessop spoke to Yahoo Finance to discuss two trends he’d seen around crypto – and his analysis may help to persuade anyone who still has any doubt about whether crypto is a solid investment or doomed to melt from solid into air.
“What’s apparent are two things — this is seen as its own unique asset class with its own fundamental drivers, which differ from other financial assets,” Jessop said.
“We see clients digging into those issues, really understanding not only the technology but the application of those assets in their portfolios. And maybe most importantly, what we’re seeing is continued purchase interest over a longer period of time.”
A recent survey conducted by Fidelity Digital Assets survey found that 71% of investors are planning to buy or invest in digital assets in the future – with 90% of institutions expecting to do the same by 2026.
“And this is a cross-section of institutions ranging from family offices and hedge funds, all the way through to much more traditional institutions,” Jessop continued. “So we continue to see slow and steady interest in progress towards bringing this asset class mainstream.”
A report accompanying the survey found that price volatility remains “the main barrier to adoption”, followed by a “lack of fundamentals to gauge value and concerns around market manipulation”.
It also found that investors were less concerned about complexity and market infrastructure than in previous years, suggesting crypto is becoming easier to access and therefore edging ever closer to the mainstream.
“The regulation and regulatory clarity still is an issue for many investors who want to make sure there’s a sound footing of regulation, or at least a direction of travel before they commit significant assets to the space,” Jessop added.
Jessop also believes “regulatory clarity” is needed – which means more rules. He suggested that “transparency” and “investor protection” are what’s missing from crypto. Once these two aspects of regulation are secured, it could push crypto towards mainstream adoption.
The Fidelity survey revealed that almost eight in 10 institutional investors believe digital assets should be part of a portfolio.
This belief is strongest in Asia, which has high adoption rates. More than three-quarters (77%) of European investors share this attitude, which has increased from about two-thirds in the previous year. Some 69% of U.S. investors also think digital assets should be part of a portfolio, compared to 64% the prior year
The long-term vision of Fidelity Digital Assets is “to create a full-service enterprise-grade platform for storing, trading, and supporting eligible digital assets” with a platform “built to the same exacting standard as other Fidelity businesses” that incorporates “the unique capabilities of blockchain technology”.
Fidelity began research and development in 2014, started mining bitcoin in 2015, and tested its first wallet and storage solution among employees in 2016.