Institutional Crypto Adoption and Sentiment Remain Strong Amid Current Market Cycle – Coinbase Survey

Institutional adoption and sentiment remain strong amid the current crypto cycle, according to an Institutional Investor survey of 250 institutional investors.

In the survey, commissioned by Coinbase (NASDAQ:COIN) institutional investors “demonstrated their resilience and expressed optimism about crypto’s role in the future.”

Sentiment improved dramatically from last year’s survey. Institutions proved undeterred from the systemic dislocations, and they “continued to invest in crypto and explore additional use cases for blockchain technology.”

When crypto winter started, we declared that it was “time to build.” It’s now clear the institutional community “adopted the same mantra over the past year.”

Allocations to crypto are on the rise

A third of institutional investors surveyed “reported that they have increased crypto allocations in the past 12 months, compared to just 17% that have decreased their crypto allocations (50% kept allocations unchanged).”

Looking forward, 64% of investors who “are currently invested in crypto said that their firm’s allocations to crypto are likely to increase in the next three years. None of those respondents expect their allocations to decline in the next three years.”

Among institutions not currently invested in crypto, “almost half (45%) said that their institutions are likely to invest in the next three years.”

Institutional investors are more optimistic in 2023

The optimism around allocations corresponds “to expectations that crypto asset prices will rise in 2024. Increasing by nearly 50 percentage points, 57% of respondents said that prices will trend higher in the next year compared with just 8% of respondents that expected prices to trend higher in 2023.”

When positioned against 14 other asset classes, crypto ranked third in terms of “its opportunity for risk-adjusted returns over the next three years.” Investors saw “the largest opportunity in private equity, with the second-largest opportunity seen in US equities.”

Asset classes with the most opportunity for attractive risk-adjusted returns

In order to unlock crypto’s performance, investors still point “to a need for regulatory clarity. More than three-fourths (76%) of those surveyed agree that the US’s position as a leader in financial services was jeopardized by the lack of sensible and well-defined crypto regulations.”

Institutional investors find consensus on crypto utility

Beyond the investment use case, institutional investors also “view blockchain technology as potentially transformative for payments and trade settlement.”

Broad consensus develops for use cases

Blockchain is seen as a quicker and more secure form of payments than “the conventional banking system, according to 73% of institutional investors surveyed.”

Slightly less – 66% – said that blockchain will “eventually replace legacy trade-settlement systems.”

According to the survey, investors also believe “that progress in these areas could unlock the next catalyst for industry growth; 66% of institutional investors said that the emergence of more real-world applications or tangible economic value will be the next catalyst.”

Survey methodology

In October, Coinbase commissioned Institutional Investor “to conduct a survey of 250 decision makers across hedge funds, venture capital firms, pensions, foundations and endowments, family offices, sovereign wealth funds, and asset management firms in the US to understand their views on crypto investing.”

This survey included institutions that currently “invest in crypto, those that have previously invested, and those that are evaluating whether to invest.”

The survey was fielded by Institutional Investor’s Custom Research Lab “from October 19 to November 6, 2023.”

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