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(Kitco News) – While the crypto market downturn of 2022 that wiped $2 trillion in value from the total cryptocurrency market cap may have turned many off to the nascent asset class, high-net-worth (HNW) individuals saw it as a good opportunity to start investigating the sector and gaining exposure while the prices were low.
According to the results of a study released on Monday by deVere Group, an independent financial advisory organization, 82% of clients with between £1m and £5m of investable assets sought advice on cryptocurrencies from their advisors over the past 12 months.
“In 2022, the crypto market delivered its worst performance since 2018, with Bitcoin, the headline-grabbing market leader, falling about 75% during the year. The price drops came as investors reduced their exposure to risk-on assets, including stocks and crypto, due to heightened concerns about inflation and slower economic growth,” said Nigel Green, the CEO and founder of deVere Group. “Yet against this backdrop of the so-called ‘crypto winter’, HNWs were consistently seeking advice from their financial advisers about including digital currencies into their portfolios.”
Green went on to note that while HNW individuals tend to be more conservative, they were not deterred by the adverse market conditions and were looking to either initiate or increase their exposure to crypto.
“This suggests that these high-net-worth clients are increasingly aware of the inherent characteristics of cryptocurrencies like Bitcoin, which has the core values of being digital, global, borderless, decentralized and tamper-proof,” Green said. “Wealthy investors understand that digital currencies are the future of money, and they don’t want to be left in the past.”
The performance of Bitcoin so far in 2023 has only served to increase the interest of HNW clients in the crypto market as major legacy financial institutions like JPMorgan, BlackRock and BNY Mellon have begun offering crypto-related services to their clients.
“The world’s largest cryptocurrency is up over 40% since the turn of the year, and this will not go unnoticed by HNW clients and others who want to build wealth for the future,” Geen said. “If HNWs were expressing such huge interest in the 2022 bear market, as market conditions steadily improve, they’re going to be amongst the first to capitalize in the forthcoming bull run.”
Data shows the inflow has already begun
Evidence that interest from both institutional and retail investors is on the rise was also reflected in the latest “Digital Asset Fund Flows Report” from the European cryptocurrency investment firm CoinShares, which showed that digital asset investments saw a surge in inflows last week, reaching $117 million, the highest since July 2022.
Bitcoin was the main focus of investment, with $116 million in inflows occurring during the week, while multi-asset investment products saw their ninth consecutive week of outflows with a total of $6.4 million being pulled from these investment products. This suggests that investors currently prefer select investments, CoinShares said.
Investors in Germany accounted for 40% of all inflows ($46 million), followed by Canada ($30 million), the U.S. ($26 million) and Switzerland ($23 million). The total assets under management (AuM) for all investment products now stands at $28 billion, an increase of 43% from the November lows.
Investment product volumes have also been on the rise, with $1.3 billion traded last week – an increase of 17% compared to the YTD average – while the broader digital asset market has seen average weekly volumes rise by 11%, CoinShares said.
While retail traders can invest in these products, institutional investors make up the bulk of investments as they offer regulatorily-compliant paths to gaining exposure to digital assets. Investment products are currently only 1.4% of total volumes on trusted exchanges.
The report also showed $4.4 million worth of inflows into short-bitcoin positions, which means that the opinion of investors “remains polarized,” CoinShares wrote.
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