New global research from digital institutional investment platform VALK shows professional investors are increasingly focusing on cryptocurrency and digital assets as worries about stretched equity valuations and poor yields in the fixed income markets grow, according to the information shared with Finbold.
In cooperation with independent research company PureProfile, VALK interviewed 100 professional investors working for institutional investors, hedge funds, fund managers, pension funds, investment banks, private equity, and venture capital in the UK, US, France, Germany, Hong Kong, Singapore, Australia, and Brazil in October 2021
Its study among professional investors working in eight major economies for institutions holding more than $1 trillion in assets under management in total, found a third (33%) have invested in crypto assets for the first time recently while 55% have increased their allocation to crypto.
Almost all the investors questioned in the UK, US, France, Germany, Hong Kong, Singapore, Australia, and Brazil believe the strong performance of the crypto asset class during the COVID-19 crisis has changed institutional views on the sector. More than half (53%) ‘strongly’ agree that digital assets are a viable asset class while 45% ‘slightly’ agree with this view.
Equity valuations and fixed income yields worries
Additionally, the research for VALK shows institutions are worried about equity valuations and fixed income yields.
Around 91% are concerned about stretched equity valuations with 48% saying they are very concerned, while 90% are worried about fixed-income yields with 39% very worried. More than a fifth (22%) expect a dramatic increase in the number of investment-grade bonds paying negative yields in the year ahead.
Predict $6 trillion market capitalisation by 2025
“The institutional investment switch to crypto and digital assets is well underway and the research highlights that with a third making their first investment recently. It’s a similar story in the wider DeFi market institutions increasingly dominating transactions with recent data showing they accounted for 60% of all transactions in the sector in the second quarter of 2021.” – Antoine Loth of VALK said in a statement.
Overall, the research found confidence in the crypto sector among the institutional sector is strong with more than half (54%) believing the total market capitalisation of cryptocurrencies will grow to $3 trillion or more by the end of next year compared to around $2 trillion now. By 2025 46% believe total market capitalisation will be $6 trillion or more.