The journey toward institutional adoption has long been a goal of cryptocurrency proponents, aiming to give the asset class a new level of legitimacy and potentially boost its price. The launch of several spot Bitcoin (BTC) exchange-traded funds (ETFs) in January marked a historic milestone for the sector and paved the way for broader adoption. However, a survey conducted by the Digital Assets Council of Financial Professionals (DCAFP) last December found that cryptocurrency adoption was already on the rise prior to the launch of ETFs.
A survey conducted in partnership with Franklin Templeton Digital Assets found that 59% of financial professionals, including 78 financial advisors who manage client portfolios, actively recommend cryptocurrencies to their clients. In particular, more than 7% of advisors recommended cryptocurrencies to all of their clients, and 29% recommended cryptocurrencies to more than half of their clients. The majority of advisors (81%) suggested allocating 1-5% of assets to cryptocurrencies, with smaller percentages recommending higher allocations.
In terms of client holdings, 83% of financial advisors reported that 10-49% of their clients have investments in cryptocurrencies, indicating a notable level of interest among investors. Additionally, 41% of advisors who do not currently recommend cryptocurrencies indicated plans to do so, with a significant portion planning to allocate to cryptocurrencies within the year.
Despite the retail-centric nature of the market, institutions are showing a growing appetite for cryptocurrency assets, according to Mathew McDermot, head of digital assets at Goldman Sachs. Highlighting the recent surge in institutional interest, McDermot explained that factors such as the launch of a spot BTC ETF could spark a “psychological shift” in investor sentiment and pave the way for asset tokenization.
McDermot emphasized the importance of regulatory clarity in driving institutional adoption, noting that the SEC’s approval of the spot BTC ETF was a significant moment for the markets, particularly in the United States. He pointed to increasing trading volume in the CME Group derivatives market as evidence of institutional interest.
Offering Bitcoin in the form of an ETF makes it more accessible to the public and removes barriers associated with storing and trading cryptocurrencies. McDermot emphasized the enhanced investment protection that ETFs offer, making them a more user-friendly option for institutional investors.
Going forward, Goldman Sachs is focused on developing a proof of concept for tokenization and leveraging blockchain technology to better serve clients interested in digital assets. McDermot envisions a “tokenization continuum,” starting with more traditional financial instruments like government bonds and stablecoins and expanding to more complex markets like real estate private equity.
McDermot sees promise in blockchain technology, citing its potential to eliminate market risk, improve operational efficiency and enhance liquidity management. While cryptocurrencies offer exciting opportunities, he believes the underlying technology has significant potential to transform financial markets.
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