New research amongst institutional investors who collectively help manage $78.4 billion of assets, reveals that over the next five years 26% believe pension funds, insurers, family offices and sovereign wealth funds will ‘dramatically’ increase their level of investment in cryptocurrencies such as Bitcoin and cryptoassets in general. A further 64% anticipate a slight rise. The corresponding figure for hedge funds is 32% and 48% respectively.
The findings are from Evertas, the world’s first cryptoasset insurance company, which focuses on covering institutional holders of cryptoassets including exchanges, custodians, traditional financial institutions, funds, family offices and ultra-high net worth individuals.
When asked why they believe institutional investors will increase their exposure to cryptocurrencies and cryptoassets, 84% of the survey respondents said it was because they expect the regulatory infrastructure for the market to improve, and this is followed by 80% who say it is because the crypto market will become much bigger, providing greater liquidity. Three in four (76%) say it is because they expect more mainstream fund managers and financial services companies to enter this market, and there will be more funds and investment vehicles in this area to choose from.
| Reason why institutional investors expect the level of investment in cryptocurrencies and cryptoassets will increase | Percentage of institutional investors interviewed |
| Regulatory infrastructure for cryptocurrencies/cryptoassets will improve | 84.00% |
| More mainstream fund managers/financial services companies will enter this market | 76.00% |
| There will be more cryptoasset focused investment vehicles to choose from | 76.00% |
| Negative interest rates and negative yields on bonds | 46.00% |
| Tokenisation of assets will increase dramatically | 44.00% |
| The crypto market will become much bigger, providing greater liquidity | 80.00% |
| Custodial services/fiduciary services for cryptoassets will improve dramatically | 44.00% |
| The investment case for cryptoassets e.g. low correlation with equities and bonds, diversification vehicle will become clearer | 50.00% |
However, Evertas’ findings reveal that institutional investors still have some substantial concerns about investing in cryptoassets. Some 56% said they are ‘very concerned’ about the lack of insurance cover for cryptoassets, while 54% were ‘very concerned’ about the working practices and compliance procedures of companies working in the sector who supply services to institutional investors. Other concerns include the quality of custodial services in this market, the availability and quality of trading desks, and reporting facilities.
| How concerned do you think institutional investors are about the following infrastructure services around investing in cryptocurrencies? | Percentage of institutional investors interviewed that are very concerned | Percentage of institutional investors interviewed that are quite concerned |
| Custodial services | 44% | 48% |
| Insurance cover | 56% | 32% |
| Trading desks/facilities | 40% | 38% |
| Reporting facilities | 42% | 50% |
| Working practices/compliance procedures of companies working in the cryptocurrency sector who supply services to institutional investors | 54% | 34% |
J Gdanski, CEO and Founder of Evertas, said: “Our research shows that institutional investors are enthusiastic about increasing their exposure to cryptocurrencies and cryptoassets in general, but there are clearly many issues regarding the infrastructure that supports these markets that still concerns them. These clearly need to be addressed if the full potential of investment from institutional investors in cryptoassets is to be realised.”
Raymond Zenkich, President and COO, Evertas said: “A lack of adequate insurance for the cryptoassets market is clearly top of the list of concerns for many institutional investors, which is perhaps not surprising when insurers are only providing capacity of around $2 billion for a market that is worth between $250 billion and $300 million. We are working closely with the insurance community to address this issue.”
Earlier this year, Evertas completed a Seed Stage funding round and raised $2.8 million. The funding round was led by Morgan Creek, who were joined by Plug n Play, Kailash Ventures, RenGen, Vy Capital and Wavemaker Genesis. Mark Yusko, Founder, CEO and Chief Investment Officer of Morgan Creek Capital Management & Managing Partner of Morgan Creek Digital Assets, joined Evertas’ Board of Directors.
HedgeThink.com is the fund industry’s leading news, research and analysis source for individual and institutional accredited investors and professionals
