Up to 83 per cent of institutional investors and wealth managers believe the recent strong performance of the two leading cryptocurrencies will fuel demand for other digital assets, the study with investors in the US, UK, Germany, Switzerland, Singapore, Brazil and the United Arab Emirates who collectively manage around USD815 billion in assets found.

Nearly three out of four (72 per cent) are confident bitcoin will breach the USD100,000 barrier while 25 per cent are not convinced it will. Among those confident about bitcoin hitting USD100,000 around half (50 per cent) are convinced the landmark will be achieved within five years. 

The survey, completed in January 2024, asked institutional investors and wealth managers to predict prices for bitcoin and Ethereum by the end of 2024. Around 76 per cent predicted bitcoin would reach USD45,000 by the end of the year – it is currently already over USD51,000. That included just 21 per cent who predicted it would hit USD50,000 or more. Around 40 per cent predicted Ethereum would reach USD2,500 by the end of the year – it is currently over USD2,700.

Thus, the upper end of the 2024 full-year forecasts have already come true, the firm says.

The same applied to predictions about the global crypto market with 60 per cent of respondents forecasting the marketcap will reach USD1.4 trillion the end of the year. It has already exceeded this level and currently stands at just under USD2 trillion. 

Anatoly Crachilov, CEO and Founding Partner at Nickel Digital, says: “The confidence of institutional investors in market growth in 2024 is striking, but even this optimism got eclipsed by the actual growth in the first weeks of the year, propelled by the broad-base demand for BTC following the successful ETF launch.

“Furthermore, the broader digital asset market is likely to become the second-order beneficiary of bitcoin appreciation, as tokens with smart contract capabilities that cater for a diverse range of innovative use cases will attract closer attention. Given smaller market cap of these tokens, any marginal dollar invested in them, tend to have a more pronounced price impact, potentially resulting in these tokens significantly outperforming bitcoin and Ethereum over the investment cycle, according to our analysis.”

The firm writes that for the first time, CoinShares will be making its offerings accessible to qualified US investors through a range of private investment products, marking CoinShares’ expansion beyond its established European base. 

CoinShares writes that it is committed to becoming the premier destination for institutions in the digital assets realm. By offering a diverse range of products, across the spectrum of beta and alpha strategies with hybrids in between, CoinShares aims to cater to the unique needs of each institution, facilitating the creation of a well-rounded and optimised crypto portfolio. 

The company writes that its vision is to deliver a seamless, holistic experience, ensuring that its institutional clients have all the tools and insights they need to navigate the dynamic world of digital asset investments. 

CoinShares Capital LLC, a wholly-owned subsidiary of CoinShares and a broker-dealer registered with the Financial Industry Regulatory Authority (FINRA), will be conducting marketing activities to qualified investors in the United States in support of CoinShares Hedge Fund Solutions’ strategies and products.

The firm writes that this initiative marks a return to its roots. Originally beginning as the commodity hedge fund Global Advisors, it later founded the Global Advisors Bitcoin Investment Fund (GABI) in 2014, which operated until 2017. 

The firm writes that this also signals a progressive transformation for the Company that leverages the expertise acquired from its engagement in crypto markets, via its proprietary trading arm, since 2016. Equipped with these distinctive qualities, CoinShares  writes that it is perfectly positioned to deliver premium products that meet the due diligence requirements of institutional investors and are on par with the offerings of established financial institutions.

CoinShares has appointed Lewis Fellas as Head of CoinShares Hedge Fund Solutions, writing that Fellas is a seasoned asset manager with 23 years of industry experience (seven in digital assets) and brings with him a unique set of skills that will help to ensure the new division’s success. The new division will utilise CoinShares’ battle-tested expertise trading and quantitative teams.

CoinShares’ CEO, Jean-Marie Mognetti, says: “In a changing macro environment prominently marked by interest rates and inflation, the demand for actively managed exposure to digital assets is a natural progression. Backed by a decade-long legacy in the digital asset industry and a team with more than two decades in hedge funds, the new division signifies the latest step in CoinShares’ evolution. Our products focus on delivering a premium experience to our investors and we are delighted to enrich our long-only asset management offerings by returning to our core founding program.”

CoinShares Head of Hedge Fund Solutions, Lewis Fellas, says: “CoinShares inspired my move into crypto asset management in 2016, so being able to lead the new division within the firm and further pioneer the space is an honour. The design of our strategies reflects the team’s deep and practical knowledge of digital assets and showcases the firm’s ability to develop new products that meet the demands of institutional investors. The long-awaited return of interest rate-driven volatility is a great opportunity that we plan to capture with our novel fund products. Each product that will be offered is designed to mitigate counterparty risk whilst providing investors with clearly defined asset class and strategy exposures.”

Laser Digital, Nomura’s digital asset subsidiary, has published the results of an independent global survey of hedge funds, representing over USD1 trillion in assets, and their attitudes to investing in digital and crypto asset markets.

Key findings from the research include: 

•          Hedge fund investors overwhelmingly regard digital assets as a major part of the investment landscape – 96 per cent of those questioned see digital assets as representing an investment diversification opportunity alongside traditional asset classes such as fixed income, cash, equities and commodities  

•          Hedge fund managers would like to see digital assets more closely integrated with traditional assets. More than nine out of 10 (91 per cent) questioned want to see digital assets combined with other traditional asset classes to produce ‘all-weather’ income strategies to help cope with the risk of inflation and the debasement risk of fiat currencies  

•          Around 90 per cent said that it is important to have the backing of a large traditional financial institution for any digital asset fund or investment vehicle before they or their clients would consider putting money into it 

•          More than four out of five (82 per cent) professional investors interviewed are positive about the digital asset class in general and bitcoin and Ethereum in particular over the next 12 months. Just three per cent of respondents are negative about the outlook for the sector while 15 per cent are neutral. 

•          Around nine out of 10 (88 per cent) say they or their clients are currently considering investing in digital assets 

•          Nearly half (48 per cent) regard bitcoin and Ethereum as providing a foundation of the Web 3.0 economy and therefore representing a long-lasting source of investment opportunities. Another quarter (26 per cent) believe they represent a long-lasting source of investment opportunities while also being highly speculative assets while 26 per cent view them simply as highly speculative assets 

•          They are not just focused on the big two cryptocurrencies – 88 per cent of those questioned said they saw value in being exposed to other carefully-chosen cryptocurrencies beyond bitcoin and Ethereum. Just 12 per cent saw no value in expanding into other cryptocurrencies 

•          Investors reported a wide range of maximum allocations to digital assets under their risk boundaries. More than a fifth (22 per cent) questioned say they can invest up to 5 per cent while 30 per cent can invest up to 4 per cent. 

•          Nearly half (45 per cent) say their and/or their clients’ total percentage exposure to digital assets will be between 5 per cent and 10 per cent over the next three years and just 0.5 per cent say they will have no exposure 

•          Investors’ preferred exposure to the digital asset class found Momentum the most popular at 80 per cent, ahead of Value at 68 per cent and Carry at 61 per cent. However more than three-quarters (77 per cent) said they would favour a risk-adjusted combination of all these factors. 

 Challenges and hurdles

•          More than three out of four (76 per cent) say there are legal or regulatory restrictions applicable to them that could prevent their fund or clients investing in a product that references exposure to digital assets.  

•          Most would have to make regulatory filings or notifications as a result of holding or investing in financial instruments focused on digital assets. Around four out of five (76 per cent) questioned cited this as an issue while another 5 per cent did not know whether they would have to. Just one in five (19 per cent) are confident they would not need to make regulatory filings or notifications. 

•          In addition, around 82 per cent say they are aware of regulatory filings or notifications that the issuer of digital financial instruments must make as a result of investors holding or investing in their financial instruments. 

Commenting on the research findings, Dr Jez Mohideen, CEO of Laser Digital, says:  “Our comprehensive study reveals that the majority of institutional investors surveyed saw a clear role for digital assets in the investment management landscape, and the benefits they can bring, such as greater diversification of portfolios.  

“For many, their outlook for major digital assets such as bitcoin and Ethereum is positive, but our study also reveals challenges and hurdles for the market. Many of our survey respondents acknowledged that there are legal and regulatory restrictions that could prevent them from investing in digital assets, and these need to be addressed by the industry in cooperation with regulatory authorities.” 

The Altana Digital Assets Fund (ADAF) invests in early-stage blockchain projects that are largely inaccessible through traditional equity investments, with the aim of allowing investors to participate in what the firm describes as “the significant upside potential of an asset class that is poised to explode”.

Altana, a multi-strategy asset management operation which Robinson – a former Tudor portfolio manager and the co-founder of Trafalgar Asset Managers – founded in 2010, is one of the pioneers in crypto investing.

The firm’s Altana Digital Currency Fund (ADCF), the first active cryptocurrency fund in Europe when it started trading back in May 2014, has returned 7,000 per cent net of fees to date – including a return of 1,495 per cent in 2014.

ADCF invests in major cryptocurrencies in proportion to their global market capitalisation and since inception has outperformed the Bloomberg Galaxy Crypto Index by more than 1,000 per cent per cent.

In January 2017 it launched Altana Specialty Finance (ASF), a specialist financing strategy that loans US dollars to crypto traders secured on their underlying crypto assets. The firm says ASF has never had a down month in the more than five years that it has been running – generating gross annualised returns of 19 per cent, with zero impairment on its loans.

The new ADAF fund uses a discretionary portfolio management strategy following a venture capital style rules-based investment process to source, research, and filter the highest-quality digital assets. According to the firm, it follows six main investment themes: layer 1 and 2 blockchain, decentralised finance, Web 3.0, centralised exchange platforms, interoperability, and metaverse/gaming.

Says portfolio manager Samed Bouaynaya: “With the current market sell-off and investor sentiment at extreme fear levels, we believe we have an extraordinary opportunity to launch the fund now and start averaging into our best blue-chip projects.”

He adds: “We have been closely monitoring key players’ liquidity positions following the recent market sell-off and work alongside Altana’s macro portfolio managers to monitor central bank policy actions. We believe both factors will soon signal a sentiment reversal. As we remain firm believers in the long-term disruptive potential of blockchain technology, these are exciting times for us.”

Altana founder Robinson says: “We recognised the opportunities for a new and truly decentralised asset class back in 2014 when bitcoin was trading at USD435. Since then, Altana has been a leader in crypto markets that are constantly changing and innovating.”

“ADAF will give our investors the opportunity to invest alongside us in game-changing blockchain technologies that have the potential to generate asymmetric returns. I am excited to be able to participate in VC-type returns yet have the ability to reallocate in real time.”

Since its establishment in 2010, Altana Wealth has grown to manage more than USD500 million in assets and employs over 30 personnel across its London and Monaco offices. The firm focuses on delivering alpha from niche strategies, with low correlation to other asset classes and broader markets, and where the firm believes it has an information or structural advantage to generate real returns above inflation.

These strategies include funds offering exposure to cryptocurrencies, focused equity, niche fixed income, FX, social impact, and carbon markets. According to the firm, over the past 20 years Robinson has made more than USD1 billion for investors through these strategies.

After a rocky September and the crypto price crash wiping out hundreds of billions of dollars from the entire market, digital currencies quickly bounced back, driving the global crypto market cap to new record highs.

According to data from MejoresApuestas.com, the global crypto market cap soared by 255 per cent YTD to USD2.75 trillion last week, or nearly USD230 billion more than the previous record in May.

As the world’s largest and most expensive digital currency, bitcoin accounts for 42 per cent of the global crypto market cap. The CoinMarketCap data show the combined value of all BTC coins more than doubled since January, despite two massive price crashes in May and September.

In the three weeks of October only, bitcoin’s price jumped from USD55,300 to an all-time high of USD66.800 and then slipped to USD61,700 at the end of last week, helping its market cap reach USD1.17 trillion. 

However, the latest boost in the crypto market has been equally driven by impressive Ethereum growth. In January, the combined value of all ETH coins amounted to USD83.4 billion. This figure soared to USD498 billion in May and then halved in the next two months after the crypto price crash.

However, ethereum quickly bounced back, with its market cap jumping to USD461.7 billion on 7 September. After a few rocky weeks and another crypto price drop, following a ban on cryptocurrency transactions and mining from China’s central bank, Ethereum’s price continued growing, driving its market cap to USD538.6 billion last week, a massive 545 per cent increase YTD.

Besides Bitcoin’s and Ethereum’s price rally, which fuelled the global crypto market growth, some other cryptos also witnessed impressive growth since January. 

The CoinMarketCap data showed Solana was the fastest growing digital coin in the crypto space this year. Since January, the market cap of the cryptocurrency soared from USD75 million to USD76.2 billion, which is 186 times the growth rate of ethereum or 875 times more than the growth of Bitcoin in this period. In the last month only, the price of the ethereum competitor jumped by 55 per cent, ranking it as the fourth-largest crypto coin by market cap.

Dogecoin follows solana when it comes to market cap increase in 2021. Since the beginning of the year, the combined value of all DOGE coins has surged by 5,428 per cent and hit USD34.5 billion last week.

2021 has also been a fantastic year for binance coin, which became the world`s third largest crypto by market cap. Statistics show the combined value of all BNB coins soared by 1,826 per cent YTD to USD104.2 billion. 

Besides these three cryptos, Cardano was the only digital coin witnessing a four-digit growth this year. Statistics show the combined value of all ADA coins jumped by an impressive 1,098 per cent YTD to USD66.4 billion, ranking it the sixth-largest crypto globally.

The new Bitcoin Strategy ProFund is the first publicly available US mutual fund or ETF designed to provide investment results, before fees and expenses, that generally correspond to the performance of bitcoin.
This innovative new ProFund eliminates the need for investors to hold their bitcoin through exchanges or wallets and offers investors a convenient way to incorporate this digital asset into their portfolios.
 
“Cryptocurrency has become a significant asset class, and our new Bitcoin Strategy ProFund provides investors access to a bitcoin strategy through a mutual fund investment,” says ProFunds CEO Michael L Sapir. “Compared to directly buying bitcoin, which may involve opening a new account with an unregulated party, this ProFund offers investors the opportunity to gain exposure to bitcoin through a form and investment method that tens of millions of investors are familiar with.”
 
The Bitcoin Strategy ProFund principally invests in bitcoin futures contracts. The Fund does not invest directly in bitcoin.
 

The same percentage said this about the size of the market and liquidity, followed by 71 per cent who see the regulatory environment for the crypto market as a major issue. 

The survey was commissioned by Nickel Digital Asset Management (Nickel), Europe’s leading regulated and award-winning investment manager dedicated to the digital assets market.
 
Anatoly Crachilov, co-Founder and CEO of Nickel Digital, says: “Whilst many forward-looking institutional investors are increasing their exposure to digital assets, our findings show that concerns around security and custody of these assets remain a top concern for many other allocators. In reality, the industry has achieved a very strong progress on that front, deploying a range of sophisticated cryptographic solutions, including distributed keys and MPC (multi-party computation) vaults, to create robust custody models. In addition to crypto-native custodians, we are now seeing Fidelity, BNY Mellon, and State Street entering the market, thus further reenforcing market infrastructure. All of this increases the confidence levels in the sector and lead to ever-growing allocations to this fast developing asset class.” 

Henry Howell, Nickel’s Head of Business Development, adds: “Security of clients’ assets is paramount at Nickel. We deploy independent institutional-grade custody solutions, in partnership with US-based Fidelity and UK-based Copper. These sophisticated solutions are based on air-gapped, multi-signature, cross-organisation custody models, thus mitigating single points of failure, typically associated with self-custody of crypto assets. In our setup, the join control over assets is retained by independent Fund Administrator and Fund Custodian at all times.”

Nickel currently has four funds investing in the digital asset space. Its market-neutral Digital Asset Arbitrage Fund pursues an absolute return strategy without expressing directional views on the underlying cryptoassets market. It exploits market inefficiencies and price dislocations, and harnesses swings of volatility to deliver consistent positive returns within a strictly defined risk management framework. The fund delivered over 95 per cent of positive months since inception two years ago, with volatility of 3.5 per cent and Sharpe of over 4. 

Diversified Alpha (Digital Factors) Fund is a non-directional multi-strategy fund which wraps a portfolio of attractive but hard-to-access and capacity-constrained strategies into a single, investible fund. Among the strategies it deploys are high-frequency market making, statistical arbitrage, relative value, volatility arbitrage, and trend following. The fund protected capital well in May, delivering a record monthly performance of +4.7 per cent despite the underlying market going through one of the strongest corrections in recent years.

DeFi Liquid Venture Fund is designed to capture the growth potential of the broader digital assets space outside bitcoin, spotting early winners in Layer 1 protocols and Decentralised Finance, the area of greatest financial innovation. The fund is an actively managed research-driven vehicle aiming at identifying early winners and capturing structural expansion of this space.  

Nickel’s Digital Gold Institutional Fund, a bitcoin tracker, provides secure, efficient, transparent, and liquid access to physically allocated bitcoin. It delivers institutional-grade precision of trade execution available 7 days a week with one of the industry’s lowest expense ratios. 

Defensive Bitcoin Fund, to be launched in September, aims to offer institutional-grade exposure to bitcoin while managing downside volatility of such portfolio. Nickel will apply an overlay of derivative instruments to reduce downside volatility while aiming to capture the majority of the upside. 

The association represent businesses that seek to share best practice, respond to industry developments, and help inform regulators and policymakers of the benefits of the technology.
 
Bitstocks joins the ever-growing roster of businesses committed to doing more to raise the calibre within the industry, and actively engage with the wider legislative dialogue around the future of bitcoin and blockchain technology.
 
Ian Taylor, Chair of CryptoUK, says: “It is our pleasure to welcome Bitstocks to the UK digital asset industry’s trade body. We look forward to working with the team as we, in partnership and with and behalf of our growing membership, raise awareness, educate and advocate in the public and private sectors.”
 
The cryptocurrency industry has previously been described as a ‘regulatory wild west’, but despite what some media reporting would have you believe, not all cryptocurrency companies are scammers and con-artists. Like Bitstocks, many companies are now actively pushing for increased regulation and oversight within the space – to weed out misconduct or deceitful practices which reflect badly on the reputation of the industry as a whole.
 
Bitstocks CEO, Michael Hudson, echoed these sentiments, saying: “Technology is the liberator of man – this is our second philosophy at Bitstocks. It’s also our approach when we look at the subject matter of compliance and how blockchain technology can aid us in our compliance goals. Transparency is now a key selling point for companies in the industry and we’re happy to be joining CryptoUK to further this.”

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The data also overviews annualised bitcoin electricity consumption in TWh between October 2015 and January 2021. Under the theoretical upper bound, the consumption has grown by 7,717.85 per cent, while on the theoretical lower bound there is an increase of 10,867.4 per cent. Estimated electricity consumption has increased by about 10,201.1 per cent over the period.

According to the research report: 

“The electricity used by bitcoin has resulted in apocalyptic and sensational views especially from critics of the digital currency. However, the outlook for bitcoin energy use remains largely uncertain. The future outlook will be influenced by efficiency improvements in hardware, bitcoin price trends, and regulatory restrictions on bitcoin mining. Additionally, most mining regions are expected to turn to renewable energy like solar and wind in the future. These factors combined might lower or increase the energy consumption for bitcoin transaction processing.”

Additionally, Trading Platforms compared electricity consumption between bitcoin and the top ten countries where the digital asset accounted for 112 TWh.

China is the leading electricity consumer with 6,510 TWh where bitcoin accounts for 1.72 per cent. bitcoin accounts for 2.89 per cent of the 3,865 TWh consumed in the United States, the second overall consumer. bitcoin’s consumption represents 9.1 per cent of India’s 1,230 TWh consumption. Russsian which ranks as the fourth at 922 TWh has bitcoin accounting for 12.14 per cent of the country’s consumption. The asset’s consumption represents 12.2 per cent of 918 TWh consumed in Japan. bitcoin represents 20.25 per cent of the 553 TWh consumed in South Korea while the consumption accounts for 20.62 per cent of 543 TWh used in Canada. Germany at 517 TWh makes bitcoin to account for 21.66 per cent.

Like any other electricity-driven industry, consumption by bitcoin is leaving behind a noticeable carbon footprint. However, the number of bitcoin’s carbon footprint might significantly reduce once bitcoin mining regions adopt a wider use of renewable energy sources.