- Some of the top money managers and institutions surveyed believe cryptocurrencies are “top contenders” for correction in 2022.
- But at the same time, some institutional players have also shown willingness to increase exposure to digital assets.
The crypto market has recently given investors the taste of massive volatility after a mega bull run earlier this year. Now some money managers believe that the crypto market is ripe for a massive sell-off in the coming year of 2022.
As per the survey done by Natixis Investment Managers, digital assets are currently the “top contender” for a “major correction” in 2022. Nearly, three quarters of the institutions polled noted that cryptocurrencies are not appropriate investment options for retail investors. The combined total of all the assets managed by the respondents stands at a total of $12.3 trillion.
CoreData Research conducted this survey on behalf of Natixis in October and November. It encompasses 500 institutional investors across various countries. This includes 20 sovereign wealth funds and more than 150 corporate pension plans.
However, in the Natixis survey, 40 percent of institutions also recognize digital assets as a legitimate investment option. But at the same time, they believe that the central bank will eventually need to regulate them.
The broader crypto market has rallied tremendously this year in 2021 adding more than $1.5 trillion to the market cap. However, the crypto market has been largely volatile over the last two weeks with some of the top cryptocurrencies testing their key support levels.
Over the last two weeks, more than $500 billion worth of investors’ wealth has been eroded from the crypto space. Bitcoin (BTC) and other cryptocurrencies have corrected anywhere between 10-30 percent recently.
Institutions keen to increase exposure in crypto
The interesting thing is that institutional players have been moving in big numbers to the crypto space. Of the total institutions surveyed by Natixis, 28 percent have already invested in crypto. Also, a third of them said that they plan to increase their crypto exposure in the next year.
This year in 2021, we have seen several traditional financial institutions start dabbling into cryptocurrencies. It includes some of the big fund managers as well as the pension funds. Besides, other big-fame investors popular in the investment circles have also dabbled into crypto. Many believe that cryptocurrencies like Bitcoin serve as a good inflation hedge in this stimulus-heavy environment.
Precisely, crypto could serve as a better inflation hedge but one should remember that the market has been largely following the movements in the global stock markets. The recent correction in crypto also aligned with the correction in global stocks.
In a word with CNBC, Goldman Sachs CEO David Solomon said that don’t expect the same returns in equities in the upcoming years. He added:
We would expect that we’re not going to see the same rate of returns in equities and many other assets over the next few years that we’ve seen over the last couple of years. I’ve been involved with a number of investment committees and charitable foundations, college boards, etc., and certainly my mindset is the returns we’ve received over the last three to five years are different than what we should expect as we go forward.
Thus, there’s an equal possibility that the cryptocurrency market might move sideways for a very long period of time as we had seen in the period between 2018-2020.