Institutional
investors are demonstrating increased confidence in digital assets, with 57%
planning to boost their cryptocurrency allocations despite ongoing market
volatility, according to Sygnum’s Future Finance 2024 survey released today
(Thursday).

Institutional Investors
Bullish on Crypto

The survey,
which polled over 400 investment professionals across 27 countries, reveals a
significant risk appetite among institutional investors, with 63% assessing
their risk tolerance as high or very high. More than half of respondents
maintain portfolio allocations exceeding 10% in digital assets.

Single
token investments remain the preferred strategy at 44%, closely followed by
actively managed exposure at 40%. The primary motivation for crypto investment
is exposure to the digital asset megatrend (62%), while portfolio
diversification (52%) and macro hedging (45%) are also significant drivers.

“Like the
previous year, 2024 was one of the new developments and watershed moments for
crypto and the broader digital asset ecosystem,” commented Martin Burgherr,
Sygnum Bank’s Chief Clients Officer. “Among the most important is perhaps the
approval and the subsequent launch of the US Bitcoin Spot ETFs, which has the potential to accelerate
the institutional adoption of digital assets.”

Finery Markets’ report for the first half of 2024 also confirms institutional interest in the cryptocurrency sector. It showed that volumes increased by 95% year over year, driven by ETF approvals.

Furthermore,
Nickel Digital’s research from last month revealed that 92% of asset managers
expect growth in funds focused on digital assets. Additionally, nearly 93% of
surveyed financial institutions believe more traditional firms will enter the
crypto space within three years.

ETFs Adds Long-Term
Credibility

The
approval of Bitcoin and Ethereum spot ETFs has significantly boosted market
confidence, with 71% of respondents expressing increased trust in the crypto
space.

Lucas
Schweiger, Digital Asset Research Manager at Sygnum Bank, commented for Finance
Magnates that these ETFs provide “a trusted, regulated entry point to
Bitcoin and Ethereum” while lending “significant legitimacy to the
asset class.”

According
to Schweiger, leading TradFi issuers and their involvement also add credibility and long-term commitment to the industry. He forecasts that ETFs
will attract a new wave of investors and institutional flows (especially those
new to crypto).

“This will
/ has led to a spillover effect, with more Bitcoin and Ethereum spot ETF
approvals around the world,” Sygnum’s Digital Asset Research Manager added.

Sygnum Bank achieved profitability in the first half of 2024 and amassed $4.5 billion in client assets, underscoring the growing interest of professional investors in the cryptocurrency sector. The bank’s client base is approaching 2,000 institutional and professional investors, reflecting its expanding influence in the digital asset market.

Shifting Investment
Preferences

Layer-1
protocols dominate investor interest at 76%, while Web3 infrastructure has
emerged as the second most attractive sector at 55%. DeFi interest has declined
to 33%, potentially due to security concerns and the more than $2.1 billion
lost to vulnerabilities in 2024.

In the 2023
survey, real estate was the most popular tokenized asset of interest. This has
now been overtaken by equity (44%), corporate bonds (41%), and mutual funds
(40%). However, this might change too.

“The
upcoming rate cuts (lower treasury yields) and higher DeFi yields (increased
crypto market activity) could shift interest from government bonds to higher
risk altcoins,” explained Schweiger. “Another interesting new trend is
transforming Bitcoin into a yield-bearing asset (through staking), potentially
competing with traditional yields in the near future.”

Asset
volatility has replaced regulatory uncertainty as the primary barrier to
institutional adoption, cited by 43% of respondents. Security and custody
concerns remain significant at 39%, while 81% indicated that better information
would encourage increased investment.

In late October, Sygnum announced the successful conversion of its Yield Core crypto fund into a Luxembourg Reserved Alternative Investment Fund (RAIF) structure. This transition aims to enhance the fund’s appeal to institutional investors by providing a regulated framework. Managing nearly $30 million in assets, the fund focuses on yield-generating strategies within cryptocurrency markets.

This article was written by Damian Chmiel at www.financemagnates.com.