3 Trends Are Drawing Wall Street to Bitcoin and Crypto: Fidelity Survey

Nick Chong

1 year ago

2 mins read

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Over the past few months, we’ve seen a strong uptick in institutions adopting Bitcoin and crypto-assets.

Nothing shows this as well as Grayscale’s Bitcoin Trust, a leading way that institutional investors can use to gain exposure to cryptocurrency. According to NewsBTC’s research, the trust brought in 62,972 BTC over the past 12 weeks. Over that same time frame, 125,368 coins were mined.

That’s to say, a single firm on behalf of its institutional clients was responsible for buying 50% of all the BTC mined over the past three months.

62,972 Bitcoin has been added to Grayscale's Bitcoin Trust over the past 12 weeks.

Over the same time frame, 125,368 BTC was mined.

Institutional investors are accumulating vast amounts of Bitcoin. Now add exchanges and the halving into the mix. pic.twitter.com/zueQphXXfl

— Nick Chong (@n1ckchong) June 8, 2020

Adding other venues like Bakkt and spot markets into the mix, and it’s clear that there is strong demand for cryptocurrency from Wall Street players.

According to Fidelity Investments, there are three reasons why institutions have suddenly increased their involvement in the crypto industry.

What Is Drawing Institutions to Bitcoin and Crypto?

On June 9th, $2 trillion asset manager Fidelity Investments released its second annual survey of institutional investors on digital assets.

Along with discovering that 36% of institutional respondents have some sort of exposure to the crypto market, the survey found the reasons why Wall Street sees promise in this market. They are as follows:

Cryptocurrencies are largely uncorrelated with other asset classes
Cryptocurrencies and blockchains are “an innovative technology play”
Digital assets have “high potential upside”

Goldman Sachs Begs to Differ

While many institutions are flooding into the Bitcoin and crypto markets seeking the aforementioned benefits, certain executives of Goldman Sachs recently begged to differ.

In a client call conducted on May 27th, the analysts said that they don’t think Bitcoin has a place in a balanced portfolio. They argued that digital assets don’t provide diversification benefits, don’t rally due to inflation, and don’t produce cash flow like equities.

“We don’t recommend gold on a strategic or tactical basis for clients’ investment portfolios. We don’t recommend bitcoin on a strategic or tactical basis,” was the presenters’ conclusion on BTC.

Warren Buffett, too, is skeptical of this nascent asset class.

The billionaire investor, known as the “Oracle of Omaha” due to his track record, has come out against Bitcoin multiple times over the past few years.

Most recently, Buffett remarked that he thinks cryptocurrencies “basically have no [intrinsic] value,” arguing that their only use is to be sold to someone at a higher price. This echoes the time he remarked that BTC doesn’t have much more value than a button on the suit he was wearing.

These latest comments come a year after he branded Bitcoin an asset for “charlatans.”

Nick Chong

I am a writer who has been following Bitcoin for years now. My insights and interviews have been featured in leading publications in the industry such as LongHash and Decrypt. I own a small amount of Bitcoin.