Asia’s ultra-rich are known for their curiosity in crypto, and some have taken steps to diversify their portfolios to hedge against losses from traditional asset classes such as stocks and real estate. However, outside of the region, institutional investors remain cautious against digital assets, including some of the oldest financial hubs such as the United Kingdom (UK) and Australia.
What is holding them back, and how can the digital assets industry unlock these underserved markets? In answering these questions, the Private Wealth in Digital Assets Study 2022, commissioned by Matrixport, uncovered some valuable insights into the sentiments among institutional investors around the world.
Interest is Growing, Yet Barriers to Investment Persist
Investors in the UK, albeit more conservative than their Asian counterparts, displayed increasing levels of interest despite the bear market. The study found that the proportion of investors describing themselves as “moderately”, “very”, and “highly interested” increased from 41 percent to 68 percent after the market crash. Australian investors were similarly undeterred, as the percentage of investors who were moderately to highly interested in digital assets rose from 49 percent to 75 percent after Terra Luna’s crash on 12 May 2022.
While this might come at a surprise, the finding is in line with global trends, as the third quarter of 2022 was said to have seen a “monumental level of institutional investment” into digital assets.
However, barriers to meaningful adoption exist, and the main factor hindering institutional investors in both of these markets is the plethora of stories highlighting fraudulent trading activities involving digital assets. As much as these investors are keen to explore this asset class, the presence of bad actors continues to deter them from taking the leap into the world of crypto finance. Many asset managers have thus chosen reliable crypto asset management services licensed by regulators, such as Matrixport.
For more information on study and to access the full report, click here.
Accessibility and Stability are Key to Boosting Adoption
In order to better serve institutional investors, it is also critical to understand what makes them tick. Interestingly, investors in both markets gave similar responses upon being asked about factors that would encourage them to adopt digital assets:
- Australia: (1) More accessible technology platforms, (2) low yield performance in traditional financial markets, and (3) entry of long-term investors and traditional finance players offering services in digital assets;
- The UK: (1) More accessible technology platforms, (2) entry of long term investors which may reduce volatility of the asset class, and (3) participation of traditional finance players.
It is evident that accessibility is key to encouraging digital asset adoption, as many investors are on the lookout for better ways to invest in these assets. This is similar to how mobile banking apps have transformed the banking industry, following the advent of smartphones.
Furthermore, to provide assurance to investors who have yet to enter crypto, the industry needs to attract those investing for the long-term rather than speculative wins, as well as traditional finance players, to further galvanise investors’ confidence in the space.
As the digital assets ecosystem focuses on building for the next crypto summer, offerings such as custodial services will be crucial to onboarding institutional investors while helping them manage risk and fulfil compliance requirements through accessible, transparent, and safe infrastructure.