The push for institutional adoption has been a key goal for cryptocurrency advocates, aiming to bring legitimacy to the asset class and potentially boost prices. The launch of several spot Bitcoin (BTC) exchange-traded funds (ETFs) in January was a significant milestone for the sector, opening the door to wider adoption. However, a survey conducted by the Digital Assets Council of Financial Professionals (DCAFP) in December showed that crypto adoption was already increasing before the ETFs were launched.
The survey, done in partnership with Franklin Templeton Digital Assets, found that 59% of financial professionals, including 78 financial advisors managing client portfolios, actively recommended crypto to clients. Interestingly, over 7% of advisors recommended crypto to all clients, while 29% suggested it to more than half of their clients. The majority of advisors (81%) recommended allocating 1% to 5% of assets to crypto, with some advising higher allocations.
Regarding client holdings, 83% of financial advisors reported that 10% to 49% of their clients had invested in crypto, showing significant investor interest. Additionally, 41% of advisors who were not currently recommending crypto indicated plans to do so, with many intending to allocate to crypto within the year.
Despite the retail-driven market, institutions are increasingly interested in crypto assets, as noted by Mathew McDermot, head of digital assets at Goldman Sachs. McDermot highlighted a recent uptick in institutional interest, attributing it to factors like the launch of spot BTC ETFs, which sparked a shift in investor sentiment and could lead to asset tokenization.
McDermot stressed the importance of regulatory clarity in fostering institutional adoption, pointing out that the SEC’s approval of spot BTC ETFs was a significant development, especially in the U.S. He mentioned the rising volumes in CME Group’s derivatives marketplace as evidence of institutional interest.
By offering Bitcoin in ETF form, it has become more accessible and removed barriers associated with storing and transacting with cryptocurrencies. McDermot highlighted the enhanced investment protection provided by ETFs, making them a more user-friendly option for institutional investors.
Looking forward, Goldman Sachs is focusing on developing proofs of concept around tokenization and leveraging blockchain technology to better serve clients interested in digital assets. McDermot envisions a “tokenization continuum,” starting with traditional financial products like Treasuries and stablecoins before expanding to more complex markets like real estate private equity.
McDermot sees potential in blockchain technology, citing its ability to reduce market risk, improve operational efficiency, and enhance liquidity management. While crypto offers enticing opportunities, he believes the underlying technology has significant potential to transform financial markets.
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