Cambridge Associates, an adviser to pensions and endowments says that institutional investors should consider entering the digital assets space, as reported by Bloomberg on Feb. 18.
A large number of institutions have watched from the sidelines as the decade-old industry tries to grow and appeal to all kinds of investors.
Institutions are reluctant to enter the space because of regulatory uncertainty and the use of cryptocurrencies to facilitate criminal activities.
Moreover, Bitcoin, the original and most popular cryptocurrency lost more than 70 percent of its value last year.
Institutions: The Crypto Sector Is Worth Exploring
The Boston-based firm published a research note in which it says that the nascent industry can be worthwhile for investors in the long term although there are risks involved.
Part of the research reads:
“Despite the challenges, we believe that it is worthwhile for investors to begin exploring this area today with an eye toward the long term. Though these investments entail a high degree of risk, some may very well upend the digital world.”
Institutional investments are highly cherished by crypto enthusiasts who believe that they bring credibility to a market that is somewhat associated with volatility and dodgy projects.
Boston Associates, which advises institutions with more than $300 billion in assets under management, cautioned that institutions that are ready to dip their toes in the crypto space must first spend a considerable amount of time learning about the ‘ins and outs’ of the space.
The advisory firm urges institutions to look at the different ways of investing in crypto such as venture capital and acquiring tokens on exchanges.
The analysts noted that the declining prices of digital assets raised several questions about the future and viability of the assets and their underlying technology – the blockchain.
However, the analysts still believe that the digital asset space is in the right shape.
“Yet, in looking across the investment landscape, we see an industry that is developing, not faltering,” highlights the report.
Institutions Coming to the Party
The crypto sector has come a long way and has done a stellar job in attracting some of the biggest names in mainstream finance.
Two public pension funds in Fairfax County, Virginia recently invested in a blockchain and digital asset-focused venture fund.
Joseph Young, a crypto investor, and analyst recently pointed out on Twitter that the crypto space has made:
“More progress in institutionalization in the last 12 months than in previous nine years.”
Last year, Yale University’s endowment made a bet in the crypto sector when the university’s influential endowment manager invested in two venture funds dedicated to digital assets.
In the same year, BlackRock, the world’s largest asset manager with more than $6 trillion in assets under management announced its intentions to explore the cryptocurrency space.
Fidelity and Intercontinental Exchange, the parent company of the New York Stock Exchange, are building infrastructure for the sector.
These are only a few examples, but they provide evidence that institutions are slowly but surely coming to the crypto party.