Institutional investors are set to replace retail investors as the major holders of digital assets, according to new research from Grayscale Investments.
Its international study found more than seven out of 10 (71 per cent) of professional investors believe institutions will hold 60 per cent of digital assets within seven years, reversing the current status where institutions hold around 3 per cent of digital assets and retail investors 97 per cent.
The research among professional investors who control USD182.5 billion assets under management found almost total agreement that institutions will replace retail investors as the main holders of digital assets – only 4 per cent said it will never happen.
Institutional interest is being driven by a range of factors, the research found, but key drivers include hardware providers such as Canaan which supplies servers and processors for digital mining being able to expand into cloud computing capital expenditure.
Around three-quarters (71 per cent) of investors believe hardware providers will take a bigger share of the predicted USD55 billion spending beyond the digital asset mining industry.
They also believe the digital payment platform sector will grow strongly – on-chain payment volumes reached USD25 trillion across stablecoins, Bitcoin, and Ethereum last year but 70 per cent of investors believe they will be worth USD30 trillion or more by 2030. One in three (32 per cent) believe it will be worth more than USD40 trillion – more than the credit card sector.
Grayscale, which conducted the research with fund managers, wealth managers, institutions, and pension funds in the UK, Germany, Italy, France, Switzerland, Denmark, Norway, and Sweden, has recently listed its first European ETF, Grayscale Future of Finance UCITS ETF (ticker: GFOF), on London Stock Exchange (LSE), Borsa Italiana, and Deutsche Börse Xetra. GFOF is also passported for sale across Europe.
“Institutional investment in digital assets is growing rapidly and professional investors expect a dramatic shift by the end of this decade reversing the traditional dominance of digital asset investment by retail investors. Retail investors will remain a very important part of the digital asset investment market but the shift underlines how the investment case is being adopted more widely,” says David LaValle, Global Head of ETFs at Grayscale Investments.
“Millions of people in the UK invest in digital assets either by buying cryptocurrency directly or through investing in ETFs and they will remain very important, but it is interesting to see the forecasts of major institutional interest,” says Hector McNeil, co-CEO, and co-Founder of HANetf, which has worked with Grayscale to bring GFOF to the European market.
GFOF tracks the investment performance of the Bloomberg Grayscale Future of Finance Index and seeks to offer investors exposure to companies at the intersection of finance, technology, and digital assets – companies that are building the digital economy – all through the familiar ETF wrapper.
The Bloomberg Grayscale Future of Finance Index comprises companies representing three “Future of Finance” pillars:
- Financial Foundations – asset managers, exchanges, brokerages, and wealth managers involved in the enablement of the digital economy
- Technology Solutions – organizations providing the technology to facilitate the digital economy through data and processing
- Digital Asset Infrastructure – includes companies directly involved in mining, energy management, and activities that power the digital asset ecosystem