Institutional Interest in Cryptocurrencies Soared in 2023
Last year saw a significant uptick in Canadian institutional investors’ cryptocurrency holdings compared to the prior bull market trend, as indicated in a recent study conducted by KPMG, an esteemed accounting firm.
In every six months, the consulting firm’s questionnaire titled “Institutional Adoption of Cryptoassets” garnered 65 completions. Among these were 31 institutional investment firms managing more than half a billion dollars in assets, and 34 financial service entities.
Institutional Interest in Crypto Assets Surged in 2023
According to a report published by KPMG on April 24, 2023, approximately 39% of institutional investors disclosed holding crypto assets either directly or indirectly. This figure represents a rise from the 31% reported in KPMG’s 2021 survey.
In the financial services sector, nearly half of the firms indicated they provided crypto asset services in the year 2023, marking a significant jump from the 41% that did so in 2021. Furthermore, the survey revealed that approximately one-third of institutional investors had invested a minimum of 10% of their portfolios in crypto assets, signifying a noteworthy rise from the 20% reported in 2021.
Kunal Bhasin, a partner and head of KPMG Canada’s Digital Assets team, pointed out that companies are considering investments in various non-traditional asset categories to shield against currency devaluation and act as dependable value repositories. This trend has gained momentum due to growing apprehensions about heightened inflation and mounting U.S. debt.
The survey identified several reasons driving institutional investors’ interest in crypto assets, including a maturing market and improved custody infrastructure. Financial firms cited increased client demand for crypto asset services as a significant factor driving their expansion into this space.
Canada Emerges as Crypto Hub
Last year, numerous cryptocurrency businesses moved a large part of their operations from the US to Canada because of intense regulatory scrutiny in the United States. Among them was Coinbase, which expanded its reach to the Canadian West Coast, praising Canada’s more collaborative regulatory style compared to the stringent enforcement actions.
Kareem Sadek, a fellow executive at KPMG’s Digital Assets practice, asserts that Canada’s decision to greenlight spot Bitcoin and Ethereum ETFs in February 2021 significantly bolstered local investor interest in the crypto asset category.
Sadek noted that the recent green light given to bitcoin spot ETFs in the US is a significant achievement for numerous market players in Canada. He proposed that this event, combined with the skyrocketing values of cryptocurrencies, has fueled increasing interest among institutional investors towards the crypto sector.
Approximately half of the institutional investors polled hold crypto assets via Canadian ETFs, trusts, or other authorized investment vehicles. Furthermore, approximately 58% of these investors have exposure to crypto through the stock market, such as Galaxy Digital on the Toronto Exchange, marking an uptick from the 36% reported in 2021.
An additional noteworthy development is the significant increase in institutional investment via derivatives markets, now accounting for approximately 42%, up from just 14% in the previous year. In contrast, venture capital and hedge fund firms saw a decrease in participation, amounting to only 25% in comparison to 29% in 2021.
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2024-04-28 01:04