Large institutional investors largely stay away from the crypto market because the asset class is highly volatile, making it difficult for fund managers, said Jared Gross, head of institutional portfolio strategy at JPMorgan. Asset Management, at Bloomberg.
“As an asset class, crypto is effectively non-existent for most large institutional investors,” Gross said. “The volatility is too high and the lack of intrinsic profit makes it a big challenge.”
Gross believes that most institutional investors “feel relieved not to have entered this market right now.” It’s unlikely anytime soon.
The bear market also refuted the idea that Bitcoin (BTC) could be some sort of digital hedge against gold or inflation, Gross added. He explained that he was “self-explanatory” that this was not the case.
The crypto market has seen some serious setbacks this year. Bitcoin fell from $47,700 in January to below $17,000 at the end of December. Ether (ETH) rose from $3,700 to $1,200 during the same period. The total market capitalization of all cryptocurrencies has grown from $2.2 trillion to nearly $810 billion, according to data from CoinMarketCap.
Although cryptocurrencies are still absent from many institutional wallets, large financial institutions are increasingly adopting them. In October, the oldest US bank, BNY Mellon, announced that it would offer ether and bitcoin custody to certain institutional clients. French bank Societe Generale has obtained a license as a digital asset service provider.
Robin Vince, CEO of BNY Mellon, said client demand has been the turning point in the supply of institutional crypto services.
According to a recent report by JPMorgan Chase, nearly 43 million Americans, or 13% of the population, have owned crypto assets at some point in their lives. Before 2020, this number was around 3%.