The cryptocurrency industry saw a tremendous surge in terms of institutional adoption in 2021. Experts suggest that this trend is likely to continue this year as well. But whether it’s a tidal wave or a trickle will depend on how the industry evolves in terms of technology that offers secure storage and protects user funds.
Institutions Fear Security Risks
The cryptocurrency market has been notoriously volatile – a common critique levied against the industry since the very beginning. However, this isn’t the primary concern among the institutional players. A recent report by Europe’s largest regulated digital-asset hedge fund manager demonstrated that is, in fact, security concerns that are holding institutional investors back from entering into the cryptocurrency and digital assets industry.
Commissioned by Nickel Digital Asset Management, the study consisted of 50 institutional investors and 50 wealth managers across the US, the UK, Germany, France, and the United Arab Emirates, who collectively manage more than $108 billion. When deciding to invest in the space, 79% of the participants cited that asset custody is the main consideration.
Volatility, Regulations Come Next
67% of the respondents are concerned with volatility in the prices of cryptocurrencies and digital assets, and 56% went for market cap. Interestingly, 49% pointed out the regulatory environment as the reason for their reluctance to jump the crypto bandwagon. However, these high-profile investors are optimistic about the prospect of that the United States regulatory watchdog, Securities and Exchange Commission (SEC), “being empowered with more authority” to regulate these assets.
The report said that 73% of institutional investors and wealth managers are in favor of granting more power to the SEC, who believe that this move would have a positive impact on the crypto prices. 32%, on the other hand, believe that “it will have a very positive effect.”
Meanwhile, the carbon footprint has been touted as a major factor that can hinder adoption. Bitcoin’s environmental impact remains a key issue for some, but not so much among the wealthy investors of the survey. This is evident from the poll results, which showed that only 12% included the carbon footprint from Bitcoin and other cryptocurrencies in their top three reasons for not investing.