Are institutional investors in a bear market? According to a poll by columnist Institutional Investor and sponsored by Coinbase, the majority of institutional investors do not expect cryptocurrency prices to rise in 2023.
A long-term vision for institutions
A gloomy 2023 for investors in the cryptocurrency market? According to a survey conducted by the Institutional Investor in conjunction with Coinbase, a significant rise in prices is not expected before the next three years.
According to this survey of 140 US institutional investors, half of them (53.6%) believe that cryptocurrency prices will stagnate in 2023. Worse still: around a third (29.3%) believe that the fall in prices will be more pronounced next year:
Figure 1 – Cryptocurrency trajectory estimated by institutions for 2023
While the majority of investors seem pessimistic about the state of the market, only 8% of them believe that the downtrend can be reversed. This dynamic, which is not unique to cryptocurrencies, can be explained by the current global economic instability, where central banks are trying to contain inflation by raising their key rates.
However, financial instability does not stop institutions whose interest in cryptocurrencies is growing day by day. 71% of respondents agree that the value of cryptocurrencies will increase over the long term. Among them, 45% strongly agree with this statement:
Figure 2 – Percentage of surveys estimating an increase in prices on the long term
Despite everything, it should be noted that the survey was carried out between September and October 2022. During this period, the FTX group was not in bankruptcy proceedings, and the price of Bitcoin (BTC) was around 20,000 dollars. Consequently, survey results may be different if conducted today.
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The relationship of institutions to cryptocurrencies
Despite the general enthusiasm of institutional investors around this new asset class, many concerns reduce the involvement of these players in the Web sector3. Indeed, their greatest fears relate to financial and legal issues:
Figure 3 – Answer to the question: “Which of the following concerns you the most when considering investing in cryptocurrencies? »
The first concern of institutions (52%) is the still uncertain regulatory framework in many areas of the Web3. We have observed this in France with the European jurisdiction MiCA and TFR: while these regulations govern cryptocurrency exchanges, they leave the question of decentralized finance (DeFi) unresolved.
The second point of concern is related to the volatility of this market (48%) and the resulting risks of manipulation (36%). On the one hand, volatility prevents institutions from guaranteeing withdrawals of assets without causing a loss in the short term. On the other hand, the risks associated with market manipulation threaten the integrity of investors’ capital.
The Web3 sector, still in its infancy, still has a long way to go before gaining stability and popularity. For this reason, Institutionals listed three factors that they believe would accentuate the growth of the sector :
- 7 out of 10 investors mention the increase in use cases;
- 4 out of 10 investors cite the need for more education on the subject;
- 4 out of 10 investors want clearer regulation.
Contrary to the pejorative discourse regularly issued by the various central banks around the world, institutional investors therefore perceive cryptocurrencies as a technological sector, in which it is necessary to invest in order to allow the implementation of new uses.
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Source: Figure 1 to 3 – Coinbase
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