Long Bitcoin 2nd Most Crowded Trade, Fund Managers’ Cash Exposure Reaches Highest Since May 2020

Long Bitcoin Is 2nd Most Crowded Trade, Fund Managers’ Cash Exposure Reaches Highest Since May 2020: Bank of America Survey

Managers are piling into cash ahead of central bank policy meetings. While equity positions are slashed to their lowest since October 2020, they are still above the historical average.

Long Bitcoin is yet again one of the most crowded trades, according to BofA’s last fund manager survey of the year.

This is despite the fact that Bitcoin is currently trading around $47,000, down 31.5% from its all-time high of $69,000 hit in early November and no longer being a trillion-dollar asset.

Long Bitcoin, however, is not the most crowded; it actually comes in second place at 18%. It is ‘long tech stocks’ (39%) that are capturing the first spot by a wide margin. Long ESG (17%) is also among the most crowded trades.

According to the survey, fund managers increased their cash allocation to 5.1%, from 4.7% in November, the highest exposure since May 2020.

Managers are piling into cash ahead of central bank policy meetings while slashing their equity positions to the lowest since October 2020. Investments in stock, however, are still above the historical average.

The US investment said, “hawkish central banks” were the biggest tail risk that has caused a surge in cash and a more defensive asset allocation.

But if the Fed meeting turns out to be dovish, cryptocurrencies, unprofitable tech, banks, and emerging markets would rally, as per the survey.

An informal Bloomberg survey of 106 fund managers this month also found that a hasty shift by central banks is the biggest downside risk for global stocks next year.

The respondents also expect value stocks to outperform equities that soared this year on future growth expectations.

“We believe 2021 was a year of recovery and 2022 will be a year of resilience,” said Katie Koch, co-head of fundamental equity for Goldman Sachs Asset Management, which oversees about $2 trillion in assets.

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Author: AnTy

36% Hedge Funds and 32% Managers with $10B in AUM Expect to Increase Crypto Exposure

36% Hedge Funds and 32% Managers with $10 Billion in AUM Expect to Increase Crypto Exposure: EY Survey

As the industry better understands the asset class, “the alpha-generating opportunities will certainly create more incentive for alternative fund managers to participate in this strategy.”

Only 1 in 10 managers currently have exposure to cryptocurrencies, according to a survey published on Monday by one of the big four accounting firms Ernst & Young. But the good thing is firms are planning to increase their exposure in the coming year.

While 10% of the hedge fund managers have exposure to crypto, a mere 4% of the private equity managers are currently reporting crypto allocations through diverse means such as crypto derivatives, listing funds, and crypto companies. AUM dedicated to crypto also remains small, at 1%-2% for hedge fund managers.

But in the next one to two years, more than 20% of institutional investors and 25% of hedge fund managers said they expect to increase their exposure to cryptocurrencies.

Among these investors, the largest managers are most likely to increase their exposure, with 36% of hedge fund managers that have over $10 billion in AUM and 32% of managers with $2 billion – $10 billion in AUM reporting that they expect to increase their crypto AUM, as per the report.

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When it comes to barriers to investing in crypto, the number one was that crypto does not align with their investment strategy, followed by volatility, regulatory uncertainty, lack of understanding of crypto, and immature market infrastructure.

Tax implications, lack of suitable investment opportunities, crypto not being ESG-friendly, and crypto being a bubble were the lowest factors preventing them from investing in crypto assets.

Greenwich Associates conducted the survey from July to September 2021 that polled 264 alternative institutional investors collectively holding about $5 trillion.

“2021 appears to be an inflection point where this asset class is gaining the attention of all institutional alternative fund managers,” notes the study. It further adds that alternative fund managers have become more active participants in crypto assets, drawn by uncorrelated returns and continued investment in institutional-grade infrastructure to support the space.

“As the industry and regulators continue to better understand this asset class, the alpha-generating opportunities will certainly create more incentive for alternative fund managers to participate in this strategy.”

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Author: AnTy

82% Wealth Managers & Institutional Investors to Dramatically Increase Crypto Holdings within 3 Yrs

82% of Wealth Managers & Institutional Investors say They will Dramatically Increase their Crypto Holdings within 3 Years

Only 7% of this new survey respondents said they would reduce their crypto exposure, and a mere 1% said they would sell their entire holding.

Four out of ten institutional investors and wealth managers from the US, UK, France, Germany, and the UAE who have exposure to crypto-assets revealed that they will dramatically increase their holdings between now and 2023.

These findings were revealed by a new survey conducted by Nickel Digital Asset Management in early June. At the time, Bitcoin’s price was between $30k and $35k.

According to the firm, in most cases, institutional investors with holdings in cryptocurrencies have very low levels of exposure as they start testing the markets. Anatoly Crachilov, co-founder and CEO of Nickel Digital said,

“The number of institutional investors and corporates holding bitcoin and other cryptoassets is growing, and their confidence in the asset class is also increasing.”

The survey further reported that while 82% expect to increase their exposure, only 7% said they would reduce their crypto exposure, and a mere 1% said they would sell their entire holdings.

When it comes to what is driving this interest, 58% of respondents said the main reason for investing more in digital assets is the long-term capital growth prospects of crypto assets. This was followed by 38% saying they are getting more comfortable and confident in holding the asset class.

37% cited more leading fund managers and corporates investing, giving them more confidence to invest, with 34% saying an improving regulatory environment is also a key factor in wanting to raise their allocation.

Many of these professional investors who already hold crypto and are looking to increase their exposure are driven by several factors, including strong market performance during the Covid-19 crisis, said Crachilov.

Crachilov also pointed to more established investors and corporations endorsing the market, and the improving infrastructure and regulatory framework as other factors for the same, saying, “These trends will continue to expand.”

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Author: AnTy

Fidelity Amasses over $100 Million from 83 Investors for its Bitcoin Fund

One of the world’s largest asset managers, Fidelity Investments’ Bitcoin Fund raised $102 million from investors since its launch in August last year.

According to the filing with the US Securities and Exchange Commission (SEC), the asset manager amassed a total of $102,350,437 from 83 investors with a minimum investment of $50,000 each, in a matter of nine months.

Last month, Morgan Stanley’s standalone Bitcoin Fund, which is offered in partnership with NYDIG, aggregated $29.4 million in its first two weeks.

The pooled investment fund is a passively-managed vehicle that Fidelity sells to qualified investors through the company’s subsidiary Fidelity Digital Funds.

Wise Origin Bitcoin Index Fund I, LP is managed by chief strategist Peter Jubber.

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Author: AnTy

Fund Managers See Bitcoin Outperforming in 2021 Despite Picking ‘Long BTC’ as the Most Crowded Trade

Fund Managers See Bitcoin Outperforming in 2021 Despite Picking ‘Long BTC’ as the Most Crowded Trade: BoA Survey

Hedge fund managers yet again think that “long Bitcoin” is the most crowded trade.

They must not have looked at the crypto market then, which means they might not even be involved meaning these fund managers think everyone is long on Bitcoin when no one really is.

Extending its losses from last week, Bitcoin crashed to $36,200, representing a 44.3% drawdown.

Still, the latest Bank of America fund manager survey, which took place between May 7 and 13 and polled 2216 participants, including 194 fund managers, with $625 billion worth of AUM, picked “Long Bitcoin” as the most crowded trade at 27%.

Prior “peaks” in crowded trades such as tech in Sept. 2018 and Sept. 2020, US Treasuries in March 2020, and US dollar in Jan. 2017 and Feb. 15 had been associated with relative tops, noted the report.

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This isn’t even the first time the fund managers have put the cryptocurrency at the top of the list. Back in January as well, “Long Bitcoin” was at the peak right before exploding to hit a new all-time high of $65,000. Before that, it topped the charts in 2017. Matt Maley, chief market strategist for Miller Tabak + Co. said,

“When an asset becomes the most crowded trade in the BofA survey, it has frequently signaled a near-term pullback in the past.”

“When you combine this with the news out of China, it’s not a surprise that Bitcoin is seeing some more weakness.”

Bitcoin has been ranked as the most crowded trade well ahead of technology stocks, ESG, thanks to the ongoing trend toward environmental, social, corporate governance, cyclical stocks, and short U.S. Treasurys.

Still, about 10% of fund managers said they think bitcoin will outperform in 2021.

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Author: AnTy

Wealth Managers Are Growing ‘Comfortable’ with Crypto But Still in ‘Education Mode’ says Fidelity

Wealth Managers Are Growing ‘Comfortable’ with Crypto But Still in ‘Education Mode’ says Fidelity

Most financial advisors and wealth managers are still in “education mode” on cryptocurrencies, said Mike Durbin, Head of Fidelity Institutional, Fidelity Investments. However, demand for crypto assets is growing among larger investors, he added.

In an interview at Reuters Digital Assets Week, Durbin shared that while some investment firms and advisors managing the fortunes of wealthy people have grown “comfortable” and “sophisticated” with crypto, most of them are still getting a grip of the technology.

“They know what they are doing, and more importantly their end investor base also knows what they are doing – but the vast majority are still in the education mode.”

Back in 2018, during the bear market, Fidelity which has $9.8 trillion in customer assets as of Dec. 31, became one of the first mainstream investment companies to embrace cryptos and set up a unit to offer crypto custody.

Interest in Bitcoin and other crypto-assets is likely to grow as “alternative investments” increase in popularity, said Durbin.

“I think that the growth rate of bitcoin or digital assets will follow in that wake of broader alternative investments.”

“There’s still work to be done there to help advisors understand portfolio construction with these kinds of expressions.”

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Author: AnTy

Bitcoin Doesn’t Need Mass Institutional Adoption, Just 1% Would Do the Trick

Institutions are increasingly getting interested in bitcoin, about a third of big asset managers currently own bitcoin, revealed a recent survey by Fidelity. Also, just last month, billionaire Paul Tudor Jones divulged that he has about 2% of his portfolio in bitcoin.

These are growing times where people recognize the world’s digital currency as the hedge against inflation, fiat debasement, and unprecedented money printing.

The white whales of cryptocurrency, institutional investors, have “long been considered the most significant barrier between Bitcoin and a multi-trillion dollar market capitalization,” said Messari analyst Ryan Watkins.

In anticipation of their hopeful arrival, firms are investing billions of dollars in building infrastructure to serve them, and partnerships are picking up “as the perfect storm appears to be brewing for investment in Bitcoin.”

According to him, a horde of large institutional investors isn’t necessary to take bitcoin to the moon, just one percent is enough to pump its market capitalization to over $1 trillion and price to $50,000.

Currently, institutions have invested only a small percentage of their assets in bitcoin primarily due to regulatory uncertainty along with hacking, fraud, and unpreparedness of the infrastructure. In his latest analysis, Watkin tested a hypothetical scenario,

“What would inflows from a 1% institutional allocation to bitcoin look like?”

This allocation involved billions of dollars in double and triple digits from endowments & foundations, family offices, sovereign wealth funds, pension funds, and mutual funds.

This much inflow could see an impact of 2x to 25x increase in the price of bitcoin and take the flagship cryptocurrency to a new all-time high of $50,000 and into the trillion market cap category.

But as we saw over the past decade, in which bitcoin has been the best performing asset, there were no institutional investors, and bitcoin has made new highs thrice purely on retail interest.

So, bitcoin may not even need institutions to succeed in the future, and retail is already increasingly jumping in amidst the economic and currency crisis. This coronavirus pandemic, political risks, and fiscal policies will also drive the institutions to it.

Moreover, retail will come rushing back and start FOMOing once the market begins seeing typical BTC moves.

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Author: AnTy

Fidelity Opens A New Entity In London To Serve Digital Assets To European Institutional Investors

One of the leading global digital asset managers, Fidelity Investments, has announced its intentions to open a new entity that will be based in London targeting European digital assets institutional investors.

In a press statement on Tuesday, the company revealed that the new subsidiary will work under Fidelity Digital Asset Services (FDAS). The firm operates in New York after acquiring a charter as a limited liability trust firm. The new subsidiary was incorporated on Dec. 16, 2019 and will offer custodial as well as trading services to hedge funds and family investors as well as market intermediaries based in Europe.

The company has already settled for Chris Tyrer who will be the overall in-charge of the FDAS affairs in Europe. Tyrer comes with a vast experience having served as the head of Barclays Investment Bank previously where he was tasked to lead the bank’s digital prospects.

He has also previously worked as the overall global in-charge of Barclays commodities trading. In the current job, Tyrer is tasked to lead customer service activities in Europe. Tyrer became a member of Fidelity Digital Assets back in April and has been crucial for the firm’s attraction of new clients from London and other European cities.

Tom Jessop, the head of the firm explained that the firm has experienced increased interest as well as engagement from the institutional community and sees no slowing signs in the near future. He added that the firm has been highly encouraged by the entrance of conventional exchanges in to the virtual assets space. He also stated that there has been high interest of the firm’s services coming from UK and other European countries, which is a sign that the region holds a lot of growth potential.

FDAS was launched one year ago and has seen tremendous growth and just last month it acquired a trust license from NY authorities to provide Bitcoin custodial services for institutions in the region. The company announced that it will bring on board its first client before the end of this year.

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Author: Joseph Kibe

38% of Asset Managers with State Street Plan to Invest in Crypto Next Year

  • The survey of State Street’s asset managers was conducted by Oxford Economics, though the firm requested this research.
  • Approximately 94% of State Street’s clients already hold digital assets and related products.

While Bitcoin used to be an asset that investors stayed away from, many asset managers are considering adding it to their own portfolios nowadays. In a statement by the managing director of digital product development and innovation at State Street, Jay Biancamano, it looks like next year could be lucrative for the crypto market, but none of the asset managers have pushed for the storage of crypto yet.

Biancamano stated, “We’re talking to them less about ‘Can you custody this,’ and more about how we can work together to make sure these changes aren’t disruptive to our business models.” During a bank-sponsored event on Thursday in New York, he added that there will be a clearer idea of what the financial institution plans to do with these assets and their custody next year. Once establishing that custody, State Street will be looking into fund administration, private placements, and the trading and issuance for this sector.

Even without much interest in the custody of crypto, clients of the bank are seemingly investing more of their own funds in the asset class. A survey conducted by Oxford Economics, at the request of State Street, found that digital assets and related products are already held by 94% of their clients. In 2020, the bank expects to discover that over a third of the clients plan to increase their allocation of digital assets, though just under half stated that their allocation would remain unchanged.

The interest in digital assets by State Street comes at a time that the bank is working to reduce plumping with distributed ledger technology, suggesting that Wall Street is giving up their push for “blockchain, not bitcoin.” The bank was forced to lay off over 100 blockchain developers this year, though Biancamano’s team’s responsibilities were independent of the developer team.

Biancamano stated, “Being able to provide custody and servicing around digital assets is different than building our entire backend infrastructure and prioritizing our technology stack to support Hyperledger blockchain.” He called these two endeavors “parallel paths,” adding that the company still has the ability to go into the sector without employing DLT engineers. While State Street still has the expertise of this sector within their staff, more of the focus will be “on the digital asset piece.”

The sample of asset managers in the survey included 101 clients, also finding that 62% believed that risk management could be improved with tokenization, and just over half of responded believed it would improve security. Only one-third of the clients expressed that it would increase liquidity or create democracy in investing for retail investors.

The clients of State Street seem to have a more bullish perspective on DLT than the actual company, as over half of the respondents stated that they’ll add the tech to their trading process in the next year. Only half of the same group made the same statements about artificial intelligence. Furthermore, the majority of clients (65%) agreed that financing products could be improved with the use of DLT.

These investors appear fairly confident in the changes that they expect to see from the market overall, as just under half of the respondents showed faith in the approval of a Bitcoin ETF by regulators in 2020. Biancamano added, “Honestly, institutions already have the ability to invest in these funds. VanEck is doing a private placement. WisdomTree announced the ability to invest on the Swiss exchange. I would like to see regulators become more comfortable with a bitcoin ETF… but I think the ability to invest in bitcoin in a fund or directly is there.”

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Author: Krystle M

Hong Kong’s SEC-like Commission Releases New Regulations On Asset Management Of Crypto’s

Hong Kong securities authority sets out the first-ever cryptocurrency regulations as asset managers and portfolios invested in virtual assets targeted. The new regulations come at a time the island country is witnessing increased levels of Bitcoin trading as pressure from mainland China intensifies.

New Regulation Dawn for Crypto Asset Management

In an official published report released on October 5, the Securities and Futures Commission (SFC), provided guidelines to asset managers with portfolios invested in virtual assets. The document titled, “Pro forma Terms and Conditions for Licensed Corporations which Manage Portfolios that Invest in Virtual Assets”, is set to lay the foundation for regulated crypto investment and trading for both retail and institutional traders.

The 37 page published report offers a clear path on trading crypto assets in the country as the agency looks forward to a much more regulated crypto environment. In the past few months, the SFC has issued a number of warnings against the unregulated trading of cryptocurrencies and closed down some operators. However, the commission looks to promote regulation of the industry without stifling the development potential of the field. The latest “terms and conditions” are a step towards that goal.

Pressure from Mainland China

For the better part of the year, Hong Kong has been under massive waves of protests as the government of mainland China continues to pressure the island state. The protests have closely been increasingly matched to the increase in demand for virtual assets in the region. However, this may not be the cause of the latest regulations by the SFC as one crypto research specialist explains.

Speaking on the new regulations, Joyce Yang, the founder and CEO of Global Coin Research, an analytical firm invested in Asian crypto market said,

“This ‘terms and conditions’ document seems to reinforce that the SFC is showing increasing understanding of the intricacies of cryptocurrency funds. They’re being transparent with their thoughts around this space, and setting guidelines that should facilitate more funding of startups in the region.”

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Author: Lujan Odera