A recent survey conducted by Bank of America revealed that the majority of global fund managers are still hesitant to invest in cryptocurrencies, despite the recent surge in prices within the sector. The survey, which involved 211 fund managers overseeing a total of $504 billion in assets, found that approximately three-quarters of respondents do not hold any crypto assets at all.
Among the fund managers who do have exposure to cryptocurrencies, their allocations are relatively small. On average, these portfolios allocate just 3.2% to digital assets. More specifically, 6% of managers hold around 2% exposure, 2% have 4%, and only 1% report allocations above 8%. When averaged across all respondents, crypto assets represent a mere 0.3% of assets under management.
Bloomberg ETF analyst Eric Balchunas commented on these findings, suggesting that the low exposure to cryptocurrencies may be a result of past investment mistakes made by these fund managers. He hinted that those who have made poor calls in broader markets previously might be exercising caution towards the rapidly growing crypto industry.
On the other hand, some industry experts see the low participation rate as a sign of untapped potential in the crypto market. Frank Chapparo, the head of content at GSR, expressed his optimism by stating that “Wall Street has barely gotten off zero and Bitcoin is still $120,000. We are going to absurdly higher.”
While digital assets have historically provided impressive returns, they also come with significant volatility. This risk factor has led many institutional investors to limit their exposure to cryptocurrencies. However, institutional interest in the sector is on the rise, with investors gaining exposure through shares of crypto companies, crypto-focused exchange-traded funds (ETFs), and the emergence of Bitcoin-focused treasury companies adding the top crypto to their balance sheets.
Moreover, the regulatory environment in the US is becoming more favorable towards cryptocurrencies. President Donald Trump recently signed an executive order allowing digital assets to be included in 401(k) retirement plans. This regulatory development is expected to encourage fund managers to reconsider their positions and potentially increase their allocations to cryptocurrencies.
Overall, while global fund managers may still be cautious about investing in cryptocurrencies, the growing institutional interest and positive regulatory changes indicate a potential shift towards increased adoption of digital assets in the traditional financial sector.