According to a survey released on Wednesday by JPMorgan Chase & Co., 72% of institutional traders (835 total) “had no plans to trade crypto” in 2023. However, some industry insiders argue that this does not indicate that cryptocurrency is no longer relevant.
The study received responses from 60 different countries between January 3 and January 23. Only 8% of respondents indicated they trade cryptocurrencies and digital coins at the moment, and 14% said they intend to do so in the next five years.
Cryptocurrency is not dead; it is simply in a “wait and watch” phase due to price discovery, regulations, and infrastructure issues, according to Youwei Yang, chief economist at BTCM, a cryptocurrency mining company. Because these developments need to be progressively established and strengthened following the succession of events that transpired in 2022, people must be patient during the darkness before dawn.
Yang is making reference to the demise of FTX, the cryptocurrency exchange that declared bankruptcy in November, as well as the crash of the cryptocurrency Luna at the beginning of 2022. Additionally, people who invested in cryptocurrency in 2022 lost nearly $3 billion due to scandals and thefts.
Tim Frost, CEO of digital asset management company Yield App, wrote in an email that the present financial environment might assist to explain the number.
At this time, those signals don’t point to a risk-on investment climate. Institutional investors like JP Morgan and its competitors would only devote a sizable amount of their portfolios to higher-risk assets in a relatively stable macroeconomic environment, according to Frost. This means that for such players in the traditional finance sector, cryptocurrencies are probably not going to be high on their list of priorities this year.
In a survey conducted by the technology consulting firm Capgemini in 2022, 2,973 high-net-worth people from around the world who had their opinions heard, 71% of whom said they had invested in digital assets, including 91% of HNWIs under the age of 40. Cryptocurrencies were cited as their preferred digital investments, followed by exchange-traded funds and metaverse investments. However, the percentage of their whole portfolio that was made up of cryptocurrencies was still relatively small.
According to Stefan Rust, CEO of independent inflation aggregator Truflation, This [JP Morgan study] appears to be directly at odds with market sentiment. Why is crypto volatility any different from the volatility present in any other FX market, given that traders enjoy volatility?
Numerous studies have shown how ultra-high-net-worth people and family offices want to invest a tiny amount of their overall portfolio in cryptocurrencies. Since research into the altcoin industry is still in its infancy, He would say that the majority of those investors would be targeting bitcoin or possibly Ether at this time.
A longtime opponent of cryptocurrencies, Jamie Dimon is the chairman and CEO of JPMorgan Chase & Co. He previously referred to bitcoin as a “pet rock” and a “hyped-up fraud.” Even so, JPMorgan is still researching cryptocurrencies; in fact, in November, it registered a trademark for a cryptocurrency wallet
According to Yang, some of the hesitations is due to the institutional infrastructure of cryptocurrency trading not being ready in terms of compliance and legality. As someone who has worked in the institutional context, He would know how difficult the compliance and the legal measure could be for a financial asset that is not clearly identifiable and unregulated.
Given that the majority of central banks are closely watching inflation and the labor market, Yang is still upbeat about the future of cryptocurrencies even though 2023 is likely to be a rocky year.
Others are keeping an eye on the macroenvironment to see what develops.
These institutions need a much stronger thesis to enter the market than retail investors, according to Jan Sammut, vice president of marketing at Original Protocol, an Ethereum-based NFT and decentralized finance platform. These institutions are also frustrated due to the current drawdown in pricing, Sammut said. They would at the absolute least want to see the Fed cut interest rates.
