The institutional narrative has become an integral part of the crypto industry’s story in recent years. As Bitcoin (BTC) collapsed last year, investors held on to hope that institutional stakeholders, whether it be household name hedge funds, pensions, or educational endowments, would dip their toes into the cryptocurrency water.
According to a recent report conducted by a trade publication and a prominent startup, this hope has paid off, as effectively all endowments surveyed claimed to have an ongoing play in the crypto and blockchain realm.
94% Of Endowments Are Testing The Crypto Waters
According to a debrief of the survey, conducted by The TRADE Crypto and American crypto firm BitGo, 94% of 150 endowments surveyed have invested money in crypto-related projects in the past year, even amid the collapse in Bitcoin. The average amount invested was not disclosed, but endowments’ allocations to this asset class and related technologies likely range in the low single-digit millions to low double-digit millions.
Interestingly, these organizations made such investments in spite of their acknowledgment that there are overt risks, including but not limited to volatility in crypto assets, regulatory uncertainty and instability, an absence of liquidity (both in cryptocurrencies and private shares), and, most importantly, a lack of “robust” market infrastructure.
In fact, even after considering the risks, a mere 7% of those surveyed expect to decrease their crypto-focused allocations in the coming year, accentuating that endowments expect for the aforementioned issues to see some resolution. The TRADE’s managing editor, Jonathan Watkins, explains:
“It’s fascinating to see that despite the widely-publicised concerns around regulation, custody and liquidity, endowments have been factoring crypto-related investments into their allocations, and very few are showing intentions of stepping away.”
What’s most interesting about this survey, however, is the medium which endowments’ portfolio managers decided to use to foray into cryptocurrency. A jaw-dropping 54% — 81 entities — directly invested in cryptocurrencies through the assets themselves, whether it be Bitcoin, Ethereum, etc., while the rest had gained exposure through index funds or venture capital funds, which they claim needs to be regulated and have sufficient capital flow and proper security measures.
Big Endowments Are Joining The Fray
While many of the endowments The TRADE & Co. surveyed were likely lesser-known, it is important to note that big names in this subset of institutions have delved into Bitcoin and its derivatives in recent months.
Just last week, as reported by Blockonomi, Bloomberg revealed that Harvard Management, the world-renowned educational institution’s $39 billion endowment, had invested in a token sale. In a report on the matter, it was explained that a U.S. Securities and Exchange Commission (SEC) filing revealed that Harvard, Lux Capital, and Foundation Capital invested $11.5 million in blockchain startup Blockstack in exchange for 95,833,333 Stacks Tokens.
In late-February, Bloomberg explained that the “CNK Fund I,” a “cryptonetwork technology” fund managed by the world-renowned Andreessen Horowitz, was in the University of Michigan’s scopes. According to Kevin Hegarty, the chief financial officer at the state-run educational institution, CNK invests in “cryptonetwork technology companies across the spectrum of seed, venture and growth stage opportunities.” It isn’t clear if the institution went ahead with the move, but considering that it already has blockchain investments, it wouldn’t be too much of a surprise.
Institutions To Bring Bitcoin To New Heights, Analyst Proclaims
While the arrival of institutions hasn’t had a material effect on the value of Bitcoin just yet, a CNBC analyst claims that such investors will propel BTC past its $20,000 high with time. In a recent CNBC “Fast Money” segment, contributor Brian Kelly claimed that institutional adoption, coupled with a growth in crypto networks, will push BTC beyond our imagination “without question” over the next two years.
He chalks his statement up to the fact that Fidelity Investments, a renowned financial services provider, has taken an absolutely colossal interest in cryptocurrencies, meaning that the arrival of “smart money” is likely just around the corner.