There was a time when skeptics and professionals alike held the belief that digital assets, cryptocurrencies in particular, might be nothing but a passing trend. That time has come and gone, and the digital asset ecosystem has matured to a point of acceptance and even acceleration.
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In a recent survey conducted by an EY-Parthenon team, 94% of institutional investors and 83% of retail investors say they are long-term believers in digital assets. This past year across the globe, we have seen registered assets (exchange traded products) approved, legislation crafted (and in some cases passed), increased allocations, and the expansion of interest in tokenized assets.
Investors are demanding more services and more options.
There is significant opportunity for TradFi firms to drive meaningful revenue by extending new services to existing clients, as well as crypto native/FinTech firms to offer more institutional-focused capabilities. Those that move quickly will reap the benefits. Of survey respondents, 54% of institutional investors and 64% of retail investors plan to increase allocations, representing a significant upside over current money invested. Institutional investors largely seek a multi-custodian model to manage their digital assets, and beyond custody, want services like connectivity to more liquidity providers, the ability to lend/borrow against their crypto and prime brokerage services — in short, the services they receive from TradFi firms for traditional assets currently.
On the retail side, 72% of retail investors see digital assets as a core part of their overall wealth strategy, and they want their current wealth and estate planning, tax and trust, and advisory services enhanced to include coverage of crypto and digital assets. By the numbers, 71% of investors have sought or plan to seek out advice from a financial advisor or planner regarding their crypto holdings, and 85% would be interested in wealth and estate planning to incorporate crypto and digital assets.
There is a strong preference for registered vehicles.
Traditional asset managers and wealth managers should take note of the emerging preference for registered vehicles in the digital asset community. In fact, 62% of institutional investors and 57% of retail investors prefer to get their exposure to digital assets through registered vehicles. Drilling down, accredited retail investors are most interested, outpacing non-accredited investors’ demand for exposure to digital assets through registered vehicles by almost two to one. Though conducted before the approval of the Ethereum ETPs, 47% of institutional investors surveyed and 69% of retail investors surveyed that currently invest/have plans to invest in digital assets noted they are likely to invest in an Ethereum ETP when/if approved.
Innovation and regulatory clarity create opportunity.
Investors are intrigued by the new capabilities presented by digital assets. Both institutional and retail investors see the opportunity for tokenized assets to improve portfolio diversification and enable greater access to new asset classes like alternative investments. Additionally, both asset managers and retail investors are gaining comfort and interest in using digital assets for payments. Asset managers, banks, payment providers, and others may see an opportunity in this increased interest.
As the regulatory landscape becomes clearer, we expect more opportunities for both institutional and retail investors. As more sophisticated players enter the market, we will see more innovations offered by crypto native players and new services offered by more financial incumbents to meet the increased demand for use cases around digital assets.
For more insights on sentiment and trends of both retail and institutional investors, read the 2024 institutional and the 2024 retail digital assets survey reports..
Note: The views reflected in this article are the views of the author(s) and do not necessarily reflect the views of Ernst & Young LLP or other members of the global EY organization.
The views expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc. or its owners and affiliates.
