Asset Managers Continue to Invest In Crypto Despite Depressed Markets and Regulatory Risks

2023/09/08 15:20

A recent research report, "Digital Assets: Managers Fuel Data Infrastructure Needs," jointly published by Amberdata and Coalition Greenwich, sheds light on the increasing institutional interest in digital assets, despite the challenges posed by regulatory uncertainties and market volatility. The findings of this report reveal a growing commitment to digital assets among asset managers and hedge funds in the United States and Europe, indicating their belief in the long-term potential of this asset class.

One of the key takeaways from the research is that almost half (48%) of the surveyed asset managers and hedge funds currently manage digital assets. This substantial percentage demonstrates a significant level of involvement in the digital asset space among institutional players. Furthermore, a quarter of these firms already have a dedicated digital assets strategy in place, while an additional 13% plan to launch such strategies within the next two years.

This enthusiasm for digital assets is underpinned by the belief that the digital asset business line will continue to grow over the next three to five years, with 44% of respondents expecting expansion. This optimism is mirrored in the participants' expectations for assets under management (AUM), with over four in ten projecting growth of more than 10% in digital AUM over the next five years.

Despite the ongoing regulatory scrutiny and market uncertainties surrounding the digital asset sector, institutional managers remain positive about the growth prospects. They are keen on diversifying their portfolios and creating new investment products within this asset class. The report also provides insights into the specific digital assets, protocols, and strategies that these managers anticipate focusing on in the coming years.

The research underscores the importance of access to high-quality data and analytics in the digital asset space. Study participants cited a need for crypto market data, on-chain data, portfolio management tools, and risk analytics. Significantly, 85% of respondents expect to collaborate with external providers to meet these data and analytics needs, indicating a growing market for service providers in the digital asset ecosystem.

Another noteworthy finding is that asset managers are actively strengthening their internal capabilities to support digital assets. Approximately 25% of those surveyed have already appointed senior roles dedicated to digital assets, showcasing their commitment to building expertise and infrastructure in this space.

Interestingly, despite the uncertain regulatory environment and challenges faced by some leading crypto exchanges, asset managers are optimistic about the future of the digital asset industry in the United States. They anticipate that American regulators will eventually establish a prudent regulatory framework for the industry, which contrasts with recent enforcement actions by the Securities and Exchange Commission (SEC) against crypto exchanges like Binance and Coinbase.

Moreover, most asset managers anticipate growth in centralized exchanges over the next five years, despite a trend toward decentralized custody solutions. This suggests that institutional investors still have faith in traditional exchanges, even in the face of emerging alternatives.

In conclusion, the research report highlights a strong and growing institutional commitment to digital assets. Asset managers and hedge funds in the U.S. and Europe are actively managing digital assets, and they remain optimistic about the industry's long-term prospects. This optimism is bolstered by their willingness to invest in data infrastructure, internal expertise, and partnerships with external service providers. Despite regulatory challenges and market uncertainties, the digital asset class continues to attract institutional interest, signaling a promising future for the crypto ecosystem.

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Asset Managers Continue to Invest In Crypto Despite Depressed Markets and Regulatory Risks

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