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November 10, 2020

Market Spotlight

Discovering Institutional Demand for Digital Assets with Cointelegraph

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Cointelegraph will publish its latest report, dubbed “Discovering Institutional Demand for Digital Assets,” on Oct. 22. Demelza Hays, head of research at Cointelegraph and co-author of the report, joined Teana Baker-Taylor to discuss some of the findings.

Hays explained how the focus of the research report was on investors across Europe who participated in a survey between June and September 2020. The median AUM of the survey participants was $500 million, and the total assets managed by the 55 asset allocators was more than $719 billion, which is double the current market cap of the broader cryptocurrency market. The survey participants oversee roughly $6 billion in crypto assets, which represents 2% of the entire crypto market. The geographical focus was in Switzerland, Germany, Liechtenstein and Austria, where there has been a lot of innovation in this field. She also described current demand, saying,

(17:12) “We had 36% saying that they had already invested in digital assets. So this means they either already owned them in the past or they currently own them. And the majority of them came in during 2019. So that was basically when most of them joined. A few of them came in during 2018. And also a good portion came in during 2020. So we had pretty much the last three years is where a lot of the respondents had entered into the market. And we also asked them, ‘Do you plan to invest in the future?’ for the respondents who said they have not currently invested. And 39% said they planned to invest in the future. So actually more of the respondents said we plan to invest in the future than said they’re already invested.”

Cointelegraph also asked the survey participants what they are investing in, such as structured products or funds, and whether they were investing directly and doing custody on their own. Hays explained,

(19:07) “Basically what we found was that the majority of people wanted to invest directly. And then the second most interesting was with regulated funds, specifically alternative investment funds. Then it was the UCITs funds; these are structures of funds within Europe. And then at the end it was structured products, which basically certificates, ETPs, ETNs. And then futures. So I have to say that overall, the majority of them wanted to interact with the spot market instead of the futures market.”

Teana also asked about the barriers to entry for institutional investors, in response to which Hays said,

(19:55) “We had an interesting perplexing result there. One tactic with surveys is you ask people the same question but in two different ways, just to see if the answer stays the same. We asked them, ‘What is your main obstacle?’ And a lot of them said regulation. But then later on in the survey we asked them, ‘Is it more internal policies within your company that’s restricting you from investing or allocating some of your company’s portfolio to digital assets, or is it regulation within your country that’s stopping your firm?’ And they said that the majority of the problem was policies within their own company that was stopping them from allocating resources and not government regulations. So I think either regulations from inside the firm or from the government is what is the biggest barrier.”

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Gerelyn Terzo
Gerelyn caught wind of bitcoin in mid-2017 and after learning about the peer-to-peer nature of Satoshi's creation has never looked back. Previously she covered institutional investing and fintech for several major trade publications. Gerelyn resides in Verona, N.J.

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