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Bitcoin (BTC-USD) has been deemed by asset managers as the cryptocurrency with the most compelling growth outlook, although ethereum (ETH-USD) remained the largest holding in their portfolios, according to a recent CoinShares survey.
Indeed, 43% of respondents took the view that bitcoin (BTC-USD), the world’s largest crypto by market cap, has the most superior upside potential. “This has come primarily at the expense of Ethereum (ETH-USD) which was in the lead at the prior survey taken in April,” the report said.
CoinShares’s quarterly survey drew responses from investors who cover $750B of assets under management. Note that the survey may not accurately reflect U.S. sentiment, with 70% of respondents coming from Europe and the Middle East, 25% from North America and around 5% from Asia.
The most popular reason (37% of respondents) for investing in digital assets continued to be the prospect for growth in distributed ledger technology, followed by diversification, speculation, good value and client demand.
In the eyes of respondents, there remains one key risk: regulation and the potential for a government ban. The nascent crypto space has come under a regulatory clampdown that has raised concerns about growth prospects. However, some have argued that regulatory clarity would bode well for crypto as it would remove the so-called bad actors from the space.
Nevertheless, asset managers’ weighting of digital assets in their portfolios shrank to 0.7% by the end of June from 1.8% in April. On top of that, more than $400M of outflows were recorded during the first half of 2023, as the U.S. Securities and Exchange Commission ramped up its effort to scrutinize the emerging industry.
The sentiment has started to shift, though. Some $470M flowed back into the market for the three weeks prior to July 14, after BlackRock (BLK) filed an application for an exchange-traded fund that would invest directly into bitcoin (BTC-USD), spurring a raft of fellow asset managers to rush to be the first to market a U.S. spot BTC ETF. The ETF race pushed up the price of bitcoin to as high as $31.4K from roughly $25K in mid-June. The token stood at $29.8K as of Friday afternoon, up 79% year-to-date.
In a separate report, CoinShares said digital asset investment products logged inflows for the week ended July 14, marking the fourth straight week of inflows, as investors cheered a U.S. judge’s ruling that Ripple Labs’ crypto asset XRP (XRP-USD) can be considered a commodity in some cases.
In addition to regulation, custody and accessibility have both been cited as reasons why institutional investors don’t want to allocate funds to digital assets, “suggesting some investors aren’t comfortable with the existing methods to invest,” CoinShares said.
SA analyst Florian Grummes, using an approach based on technical analysis, reckons the most likely direction for bitcoin (BTC-USD) is higher, in the wake of the recent excitement surrounding a potential spot BTC ETF. Still, he warned to remain skeptical given “the macroeconomic outlook as well as the typical summer lethargy.”
