Crypto insurance firm Evertas published research showing that over the next five years 26% believe pension funds, insurers, family offices and sovereign wealth funds will “dramatically” increase their level of investment in cryptocurrencies such as bitcoin and cryptoassets in general. A further 64% anticipate a slight rise. The corresponding figure for hedge funds is 32% and 48% respectively.
When asked why they believe institutional investors will increase their exposure to cryptocurrencies and cryptoassets, 84% of the survey respondents said it was because they expect the regulatory infrastructure for the market to improve, and this is followed by 80% who say it is because the crypto market will become much bigger, providing greater liquidity. Three in four (76%) say it is because they expect more mainstream fund managers and financial services companies to enter this market, and there will be more funds and investment vehicles in this area to choose from.
The findings also show that institutional investors still have some substantial concerns about investing in cryptoassets. Some 56% said they are”‘very concerned” about the lack of insurance cover for cryptoassets, while 54% were “very concerned” about the working practices and compliance procedures of companies working in the sector who supply services to institutional investors. Other concerns include the quality of custodial services in this market, the availability and quality of trading desks, and reporting facilities.
Raymond Zenkich, president and COO at Evertas, said in a statement: “A lack of adequate insurance for the cryptoassets market is clearly top of the list of concerns for many institutional investors, which is perhaps not surprising when insurers are only providing capacity of around $2 billion for a market that is worth between $250 billion and $300 billion. We are working closely with the insurance community to address this issue.”
Evertas commissioned a research firm to interview 50 institutional investors in July 2020 who collectively help manage $78.4 billion of assets: 25 were based in the UK and 25 in the US. Evertas was founded in 2017 and has a licence from the Bermuda Monetary Authority.