J. P. Morgan Survey: Only 8% of Institutions Trade Crypto as FTX Shadow Still Lingers

• 72% of the 835 institutional investors surveyed by J. P. Morgan said they are not interested in entering the crypto markets.
• 14% of respondents said they plan to trade crypto in the next five years, and 6% said they plan to do so within a year.
• The reluctance to enter the crypto markets might be connected to the collapse of FTX and the regulatory uncertainty surrounding the industry.

Institutional investors seem to be reluctant to enter the crypto markets. Only 8% of institutional investors are currently trading cryptocurrencies, according to a survey conducted by banking giant J. P. Morgan.

The e-Trading Edit survey asked 835 institutional investors from 60 countries about their outlook on macroeconomics and investing in various asset classes in 2023. 

72% of the surveyed institutional traders said they have no plans to trade crypto. 14% said they plan to trade crypto in the next five years, while another 6% said they want to enter the market within a year.

On top of that, only 12% of the respondents named blockchain technology the most influential for trading in the next three years. 53% said artificial intelligence (AI) and machine learning would have the most influence on trading. That’s a significant jump from last year’s results when blockchain and AI both received 25% of the votes.

In general, the decreased institutional interest in crypto has perhaps most to do with what the industry saw in 2022 – multiple bankruptcies, FTX fraud, and an 80-99% drawdown in digital asset prices.

FTX Shadow Still Lingers Over Crypto Markets

While it’s unclear why institutional investors are specifically not interested in trading crypto, 46% said that the biggest trading challenge in 2023 is volatility in markets.

The inherent volatility in crypto markets has been exaggerated by several bankruptcies, the biggest of them being FTX. When Sam Bankman-Fried’s exchange collapsed, Bitcoin (BTC) went down by 27% to as low as $15,500.

On top of that, multiple key crypto people like Coinbase CEO Brian Armstrong have said that the FTX collapse and the uncovered alleged fraud have been a major blow to the industry’s reputation.

This, together with the bankruptcies and potentially illegal activities of other crypto players like Three Arrows Capital, Celsius, Genesis, and Terra Luna, have only added to the regulatory uncertainty surrounding the future of crypto markets.

On the Flipside

• Narratives in financial markets can shift very quickly. It wouldn’t be surprising if institutional investors were more interested in trading crypto in the coming months.
• Multiple banks and other financial institutions have already announced their plans to enter the crypto markets.

Why You Should Care

Institutional investors are what the crypto industry has been waiting for for a long time. While only 8% are currently investing in crypto assets, it’s encouraging to see that there are around 20% who are waiting on the sidelines to enter the markets. For retail investors, this might mean it’s still early in the crypto game.

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