Why This Fidelity Study Could Open Up a Crypto Rally

Despite the headline crash of cryptocurrency prices last year, about half of institutional investors consider digital assets to be worthy of holding in portfolios, according to a recent Fidelity Investments survey. Meanwhile, one strategist who correctly predicted Bitcoin's fall, now forecasts a long-term recovery in the once red-hot market.

Fidelity, which began a service to hold Bitcoin for its customers this year, conducted a survey involving 441 institutional investors from November to February. As the asset manager builds out its Fidelity Digital Assets business, it’s attempting to gain insight into how comfortable pensions, family offices, hedge funds, endowments and foundations are with owning cryptocurrencies.

Fidelity’s survey took place during a bear market for digital assets, which have made a partial comeback over the recent months. Bitcoin, the world’s largest digital coin by market cap, has recovered nearly 70% of its value over three months, yet remains more than 70% from an all-time-high near $20,000.

What the Fidelity Survey Tells Us About Crypto

  • Almost seven in 10 respondents cited certain characteristics of digital assets as appealing
  • 47% view digital assets as having a place in their investment portfolios
  • 72% prefer to buy investment products that hold digital assets, 57% prefer to buy crypto assets directly, 57% prefer to buy an investment product that holds digital asset companies
  • 22% of institutional investors already have some exposure to digital assets, with most investments having been made within the past three years.
  • Four in ten respondents say they are open to future investments in digital assets over the next five years.

Source: Fidelity Investments

Crypto Analyst Says Buy on Weakness

According to the survey’s results, 57% of institutional investors said they preferred to buy digital assets directly, while 72% would rather purchase investment products that hold digital assets. While the digital currency space has scared away more conservative investors concerned about issues including fraud, market manipulation and a series of scandals that have hindered the crypto-industry’s claim to legitimacy, the survey found that 47% of institutional investors believe digital assets are worth investing in. The same percentage indicated that they “appreciate” cryptocurrency as an “innovative technology play,” while 46% marked that they find the low correlation between digital coins and other asset classes as the most appealing characteristic.

The Fidelity survey, done with Greenwich Associates, comes as Fundstrat technical strategist Robert Sluymer says that Bitcoin, trading at its highest price in six months, is in the middle of a sustained recovery. He recommends that investors use recent weakness to buy the digital currency on the dip.

“Use pending pullbacks to continue accumulating Bitcoin in the second quarter in anticipation of a second-half rally through ~6,000 resistance,” wrote Sluymer in a recent note, as cited by Bloomberg. The market watcher views bitcoin’s rebound from its 200-week moving average as signaling the early stage of a longer-term recovery.

Looking Ahead

Despite headwinds facing the crypto space, a move toward more clear regulation and support by major investors should help push the industry into the mainstream. According to Fidelity, 22% of institutional investors already have some exposure to digital assets, and institutional investments in cryptocurrencies are likely to increase over the next five years.

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