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Asset managers considered Bitcoin (BTC-USD) the cryptocurrency with the most compelling growth outlook, although Ethereum (ETH-USD) remained the largest holding in their portfolios, according to a recent CoinShares survey.
In fact, 43% of respondents saw Bitcoin (BTC-USD), which is the largest cryptocurrency in the world by market capitalization, and has the highest upside potential. This came primarily on account of Ethereum (ETH-USD) which was at the forefront of the previous survey conducted in April,” the report said.
CoinShares’ quarterly survey drew responses from investors covering $750 billion in assets under management. Note that the poll may not accurately reflect American sentiment, as 70% of respondents come from Europe and the Middle East, 25% from North America and about 5% from Asia.
The most popular reason (37% of respondents) for investing in digital assets continues to be the growth potential of distributed ledger technology, followed by diversification, speculation, good value, and customer demand.
In the eyes of respondents, there remains one major risk: regulation and the possibility of a government ban. The fledgling cryptocurrency space has been hit by a regulatory blockade that has raised concerns about its growth prospects. However, some have argued that regulatory clarity would bode well for cryptocurrencies as it would remove so-called bad actors from the space.
However, asset managers’ weighting of digital assets in their portfolios shrank to 0.7% by the end of June from 1.8% in April. Moreover, more than $400 million in outflows were recorded during the first half of 2023, as the US Securities and Exchange Commission ramped up its efforts to scrutinize the nascent industry.
However, feelings began to shift. About $470 million flooded back into the market for the three weeks leading up to July 14, after BlackRock (BLK) placed an order for an exchange-traded fund investing directly in bitcoin (BTC-USD), spurring a group of fellow asset managers to scramble to be the first to market a spot BTC ETF in the US. The ETF race sent bitcoin’s price up to $31.4k from about $25k in mid-June. The token was stable at $29.8K as of Friday afternoon, up 79% year-to-date.
In a separate report, CoinShares said digital asset investment products recorded inflows for the week ending July 14, the fourth straight week of inflows, as investors welcomed a US judge’s ruling that Ripple Labs’ crypto asset XRP (XRP-USD) can be considered a commodity in some cases.
In addition to regulation, custody and access have been cited as reasons for institutional investors’ unwillingness to allocate funds to digital assets, “suggesting that some investors are uncomfortable with existing methods of investing.” CoinShares He said.
SA analyst Florian Groms, using a technical analysis-based approach, believes that the most likely direction for Bitcoin (BTC-USD) is higher, following the recent excitement surrounding a potential BTC ETF. However, he cautioned against remaining skeptical given the “macroeconomic outlook as well as the usual summer lethargy”.