Investors are increasingly interested in the cryptocurrency market: verdict from Ernst & Young experts
The number of alternative traditional investors turning their attention to cryptocurrencies has grown rapidly recently, according to new research from audit and advisory firm Ernst & Young. Generally speaking, the term “alternative investments” in this context refers to assets that are not stocks, bonds or national currencies. Accordingly, we are referring to precious metals, works of art, collections of rare objects, real estate, and so on. We tell you more about what is happening.
It should be noted that many large companies are already purchasing cryptocurrency and holding it as a full-fledged capital investment instrument. So far, Bitcoin has been the most popular investment vehicle. Specifically, BTC has been bought by representatives of 23 public companies.
The leader among them is still MicroStrategy, which is managed by Michael Saylor, an ardent fan of the first cryptocurrency. The giant has 114,042 BTC at its disposal, with $3.16 billion invested.
Volume of Bitcoin savings at public companies
The second most capitalised cryptocurrency, Etherium, is not yet as popular. Specifically, only three public companies hold it, with a maximum equivalent investment of $50.5 million by Meitu.
The volume of Etherium holdings by public companies
From the looks of things, this trend will increase and there will be more and more buyers of cryptocurrencies.
Who wants to buy Bitcoin?
31 per cent of hedge fund managers, 24 per cent of alternative investors and 13 per cent of private wealth managers said they plan to add cryptocurrency to their investment portfolios in the next one or two years. According to the survey, managers of the largest companies are most likely to be interested in the potential of the crypto market.
The largest companies are considered to be hedge funds controlling more than $10 billion, as well as investors with $2 billion to $10 billion in capital. Accordingly, their attention to the digital asset market is equally important.
Bitcoin price trend over the past 30 days
It would seem that those involved in alternative investments should have been interested in crypto much earlier. But that’s actually not the case: according to an Ernst & Young survey, only 7 per cent of “alternative” hedge fund managers have digital assets in their portfolio. Of this category, crypto derivatives and investments in cryptocurrencies remain the most popular investments.
The head of blockchain security at EY, Joe McCarney, told Decrypt that even fewer firms were interested in cryptocurrencies in 2020. 78 per cent of sceptical hedge fund managers who haven’t yet invested in crypto said Bitcoin and altcoins are not aligned with their firms’ strategy. In addition, they don’t like the high volatility, regulatory issues and the general difficulty in learning the fundamental value of crypto investing.
As a reminder, volatility refers to dramatic changes in a coin's exchange rate - and in both directions. This is indeed inherent in cryptocurrencies, whose market is completely open and thus can experience the impact of coordinated investor activity. As evidence of this, you can look at Bitcoin's chart over the past few days. The cryptocurrency has experienced many collapses and sharp growth phases during this week.
Bitcoin’s hourly chart
McCarney also added that the adoption of the first Bitcoin ETF did not make much of an impression on alternative investors. From his experience, they are more concerned about cybersecurity and the availability of institutional-level digital asset storage solutions. However, the fact that many of those previously hesitant about crypto will be willing to invest in it in the next two years is already positive news for the industry.
Bitcoin and Etherium
We believe that sooner or later big investors will indeed be actively investing in the cryptocurrency industry. There will be no avoiding this - at least because more and more ordinary people are interested in digital assets and are already interacting with them. Consequently, banks and other financial platforms will be forced to get in touch with crypto. And it will only be a matter of time before the decentralised finance industry spreads further.
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