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Home > Financial Services > CHART OF THE DAY: Institutional investors warm to digital assets

CHART OF THE DAY: Institutional investors warm to digital assets

Jan. 25, 2021 by Anthony DeCandido and Jamison Sites

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Bloomberg’s Galaxy Crypto Index, which includes Bitcoin, Ethereum and three other digital assets, has rallied from a 52-week low of 177 last March to a high of 1,650 in January — its highest point since January 2018. The index measures the performance of the largest cryptocurrencies traded in U.S. dollars.

Cryptocurrencies, and their underlying blockchain technology, have gained interest from investors over the past several years because of the immense profits they can generate. Investors have increasingly seen cryptocurrencies, in particular Bitcoin, which accounts for 66% of the market, as a potential hedge against inflation, which has increased from a low of 0.1% in May to 1.4% at the end of 2020.

And there is increasing evidence that institutional investors are looking to invest in digital assets. Grayscale, which operates the only exchange-traded digital asset products available in the United States, recently reported that its average institutional allocation in the fourth quarter of last year was $6.8 million, more than double the average in the previous quarter. Total contributions for the period totaled $3.3 billion.

But with the index moving in the same direction as equity markets, others suggest that this is nothing more than market enthusiasm, fueled by a positive economic outlook and novice investors coming into the market. A period of rising prices for digital assets and declining equity prices would imply the opposite, which is that there is rising momentum for digital assets.

Any news of further geopolitical stress or government intervention could hurt adoption rates, but widespread adoption of cryptocurrency will likely grow as governments and financial institutions look to digital money as a way to distribute aid and manage financial services. This could be particularly true in the life sciences sector as industry looks to address disjointed supply chains and distribution of critical goods.

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Filed Under: Financial Services Tagged With: Bitcoin, coronavirus, Covid-19, cryptocurrency, digital assets

About Anthony DeCandido

@adecandido1

Anthony is a Partner at RSM US LLP with over thirteen years of experience at the firm. He serves as the Connecticut Financial Services Leader and his client responsibilities includes private equity funds, including those with multiple co-investment vehicle arrangements, hedge funds, fund-of-funds, real estate investment companies and asset lending businesses.

In January 2018, Anthony was selected as a senior analyst in RSM’s cutting edge Industry Eminence Program, which positions its senior analysts to understand, forecast and communicate economic, business and technology trends shaping the industries RSM serves. These senior analysts advise clients on conditions impacting middle market leaders. Anthony’s focus is on the financial services industry.

About Jamison Sites

@JamisonSites

In May 2020, Jamison was selected as a senior analyst in RSM’s cutting edge Industry Eminence Program, which positions its senior analysts to understand, forecast and communicate economic, business and technology trends shaping the industries RSM serves. These senior analysts advise clients on conditions influencing middle market leaders. Jamison’s focus is on the financial services industry.

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