With the bear market in full swing, 62% of cryptocurrency investors have added to their portfolios in the last year. At least that’s what a Coinbase-sponsored study reveals.
Despite the disastrous consequences of the collapse of Terraform Labs, Three Arrows Capital, Voyager Digital and more recently FTX, institutional investors strongly believe in the potential of cryptocurrencies. According to the Coinbase survey, only 12% of cryptocurrency investors have reduced their holdings since the start of the bear market.
Bear market: an opportunity for institutional investors
The survey covers 140 US-based institutional investors with a total of $2.6 trillion in assets under management. Most investors surveyed say they increased their holdings during the crypto winter. Likewise, many of them are taking advantage of the current situation to make long-term investments.
The survey reveals that the main reason institutions want to invest in cryptocurrencies is the profitability of digital assets. That said, some of them also want to be at the forefront of new blockchain and cryptographic technologies.
According to the survey, 58% of institutional investors plan to increase their investments in the next three years. Most of them (59%) adopt or intend to adopt a long-term investment strategy.
As of this writing, the market capitalization of the cryptocurrency market is just under $860 billion (versus more than $2 trillion in 2021). A decline that can be explained by the decline in the price of Bitcoin, which is currently around $16,500, but also by other macroeconomic factors.
The report points out, however, that the high volatility of the cryptocurrency market is seen as an opportunity by institutional investors looking to generate additional profits.
Cathie Wood, CEO of Ark Invest, predicts that the price of Bitcoin will reach one million dollars by 2030. In a new interview with Bloomberg, the American entrepreneur said: game, but it will take time. Maybe the institutions will back off, but once they do their research and see what happened here, I think they can more easily look to Bitcoin and Ether as a starting point.”
Cryptocurrency market sentiment is “deeply negative” according to CoinShares latest weekly report. Indeed, the analytics platform reports that inflows reached $44 million during the week, but most of these flows were from short-term investment products.
Coinbase’s survey, however, reveals that 72% of respondents remain optimistic about the future of the cryptocurrency market. 86% of them have already invested in cryptocurrencies, while 64% are considering doing so. That said, institutional investors still believe that regulatory compliance will be a key driver of market growth.
Regulation: A key factor in the growth of the cryptocurrency market
According to the Official Monetary and Financial Institutions Forum, an independent think tank on economic and investment policy, regulation is also expected to play a crucial role in the future of cryptocurrencies.
Starling Bank, a leading UK-based digital bank, recently tightened its grip on cryptocurrency transfers and suspended all payments into and out of cryptocurrency exchanges. Without a doubt, decisions like this will have a major impact on the future of the cryptocurrency market.
Sheila Bair, a policy consultant and former head of the Federal Deposit Insurance Corporation, told the Financial Times lawmakers they should develop a regulatory framework for the industry. “Establishing a regulatory framework, publicly announcing it and applying it by changing the rules. Keep going because more and more people are being harmed.”
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