Nickel Digital Asset Management (Nickel), the London based digital assets hedge fund manager, has released the results from a study that found wealth managers and institutional investors, who collectively manage around $108.4 billion in assets, are now looking more favourably on cryptocurrencies since the start of the pandemic.
Some of the findings include: 43 per cent now saying they now have a much more positive view of cryptocurrencies, with 35 per cent saying it has improved slightly. Looking at specific coins, 78 per cent of wealth managers and institutional investors now have a positive or constructive view of Bitcoin, with only nine per cent saying their perception of the cryptocurrency is negative. The corresponding figures for Ethereum are 77 per cent and seven per cent respectively.
When asked to pick their three main reasons for developing a more positive view of cryptocurrencies since the crisis started, 58 per cent of professional investors cited strong capital growth, and this was followed by 53 per cent who said it is because many crypto and digital assets have shown attractive diversification benefits when compared to mainstream asset classes. Some 47 per cent of respondents included improving custodial services in their three main reasons for having a more positive view of cryptocurrencies, and 41 per cent cited growth in market capitalisation and its positive impact on liquidity, among their top three reasons.
|Reason for developing a more positive view of cryptocurrencies since the Coronavirus crisis started||Percentage of institutional investors and wealth managers who cited this factor as one of their three main reasons for developing a more positive view of cryptocurrencies|
|Strong capital growth of many mainstream cryptocurrencies||58%|
|Clearer diversification benefits||53%|
|Improving custodial services||47%|
|Improving market cap and its impact on liquidity||41%|
|Improving regulatory environment||31%|
|More crypto/digital investment strategies to choose from||28%|
|Growth of decentralised finance (DeFi)||10%|
Fiona King, Head of Institutional Sales, Nickel Digital, commented “Many cryptocurrencies have performed well since the covid-19 crisis began. From 1 January 2020, the value of Bitcoin and Ethereum have increased by 460 per cent and 1812 per cent respectively.
“The crypto and digital markets have also matured a great deal, providing greater custodial services and liquidity for example. There is still much more to be done – especially in the area of regulation – but the market will continue to evolve and grow, and as this happens long-term perceptions of crypto and digital assets will improve even further, and professional investors will increase their allocation to them.”
Nickel Digital’s infrastructure is designed to offer various access points to the crypto market. It also has four funds investing in the digital asset space. Its market-neutral Digital Asset Arbitrage Fund pursues an absolute return strategy without expressing directional views on the underlying crypto-assets market. It exploits market inefficiencies and price dislocations, and harnesses swings of volatility to deliver consistent positive returns within a strictly defined risk management framework. The fund delivered over 96 per cent of positive months since inception over two years ago, with volatility of 3.5 per cent and Sharpe of 3.4.
Diversified Alpha (Digital Factors) Fund is a non-directional multi-strategy fund that wraps a portfolio of attractive but hard-to-access and capacity-constrained strategies into a single, investible fund. Among the strategies it deploys are high-frequency market-making, statistical arbitrage, relative value, volatility arbitrage, and trend following. The fund protected capital well in May, delivering a record monthly performance of +4.7 per cent despite the underlying market going through one of the strongest corrections in recent years.
DeFi Liquid Venture Fund is designed to capture the growth potential of the broader digital assets space outside Bitcoin, spotting early winners in Layer 1 protocols and Decentralised Finance, the area of greatest financial innovation. The fund is an actively managed research-driven vehicle aiming at identifying early winners and capturing structural expansion of this space.