Although digital assets have attracted a wide adoption from traders, institutional investors and wealth managers are still skeptical about the technology.
One of the main concerns for institutional investors is crypto security and price volatility. In recent years, regulatory uncertainty grew and was in fact a contributor to the high increase in digital tokens’ volatility, according to a report commissioned by Nickel Digital Asset Management that was first reported by Bloomberg.
After an interview with 50 wealth managers and 50 institutional investors from the United States, Germany, France, the United Arab Emirates, and The United Kingdom — who are managing a collective sum of $108.4 billion in assets, here are the top four concerns:
- 79% cited asset security as the main consideration
- 67% expressed a level of price apprehension in volatile price swings
- 56% said it was the market capitalization
- 49% said it was the regulatory uncertainty
“Our research shows that institutional investors have correctly identified custody and security as a critical differentiator to this unique asset class,” said Henry Howell, head of business development at Nickel Digital.
On the other hand, only 12% raised concerns about the carbon footprint from crypto. This is because the process of mining cryptocurrencies ( which rely on the proof-of-work model) relies on intensive energy consumption, to create mining blocks and validate transactions.
Nickel Digital is the largest regulated digital-asset hedge fund manager in Europe. The firm said that 76% of its survey respondents were positive that Gary Gensler, chair of the U.S. Securities and Exchange Commission will be able to convince Congress to give his agency more authority for digital assets governance by the next year.
“If the SEC is granted these extra powers, 73% of institutional investors and wealth managers believe this will have a positive impact on the price of crypto and digital assets — 32% believe it will have a very positive effect,” the study said.
Gensler who taught a crypto course at the Massachusetts Insitute of Technology has disclosed that he is neutral and even intrigued by the technology but he isn’t about the protection of investors. He also said that digital assets could improve economic progress and gain wider adoption.