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Hedge Fund & Corporate Crypto Adoption Gaining Momentum

Recent surveys of hedge fund CFOs, wealth managers, and institutional investors highlight that interest in cryptocurrency is far from waning. Corporations and investment professionals are merely in the very early stages of amassing exposure to this nascent asset class.

Is cryptocurrency adoption reaching a tipping point? Surveys conducted by Nickel Digital Asset Management and Intertrust Group in many ways reflect this notion. The survey results highlight the growing interest in allocating portions of cash holdings and treasury reserves to Bitcoin. (See Bitcoin Stock Comparison on TipRanks)

Although MicroStrategy (MSTR) and Tesla (TSLA) may have dominated the headlines with their purchases of the seminal cryptocurrency, they are but a few of the publicly traded companies that have exposure to Bitcoin, according to Nickel.

The firm’s research pointed to 19 listed companies, with a collective market capitalization exceeding $1 trillion, that currently have Bitcoin allocations worth approximately $6.5 billion on their balance sheets.

The geographical composition of these companies is mainly centered on North America, with 13 Canadian and U.S. companies making the list. The remaining companies are located in Europe, Turkey, Hong Kong, and Australia. Moreover, Nickel revealed that another 17 unnamed companies had added exposure to the asset class, although details are sparse at this stage.

More impressive than the publicly-listed companies accumulating the cryptocurrency is the $43.2 billion of Bitcoin held by exchange-traded products (ETPs) and closed-end trusts. Besides retail exposure, the exciting development here centers on the growing adoption by asset managers and institutional investors.

Cryptocurrency Numbers Rising

Besides for the allocation research, Nickel’s survey of 50 wealth managers and 50 institutional investors earlier this year revealed the following staggering highlights:

● 81% of respondents expect to see a greater number of corporations embrace Bitcoin as part of their treasury reserves

● Of the 81% of respondents, 29% believe that this trend will experience sensational levels of growth

These results are echoed by an April survey of 100 senior-level hedge fund participants from Europe, North America, and Asia, which was commissioned by Intertrust Group. Among the revelations was that 98% of respondents believe that their funds will have investment exposure to cryptocurrencies within the next five years. In addition, allocation forecasts revealed the following:

● Survey participants believed that, on average, 7.2% of cash holdings would eventually be stored in cryptocurrencies

● Of the total, one in six of the respondents thought that more than 10% of their total investment holdings would be in cryptocurrency

● The highest levels of exposure are expected in North America, where respondents expect to see allocations on average reaching 10.6% of AUM

Adoption in its Early Stages

Together, these noteworthy findings suggest that the pace of adoption, both in the corporate and financial industry spheres, is only in its early stages. For instance, figures compiled by The Carfang Group, which are based on Federal Reserve data, show that US corporations had cash holdings of approximately $3.82 trillion on their balance sheets at the end of 2020. Even if only 1% of this total, $38.2 billion, were allocated to cryptocurrency, it would mark a nearly 6-fold increase compared to today’s $6.5 billion in corporate Bitcoin holdings.

Even if corporate, hedge fund, and institutional investor accumulations stay in the single-digit percentage levels for the years to come, inflows could significantly outstrip the $38.2 billion previously mentioned.

Figures corresponding to the higher range of the estimates posited by the survey respondents reveal that Bitcoin adoption momentum could be faster and more furious than even the most conservative estimates model.

Disclosure: Reuben Jackson held no position in any of the stocks mentioned in this article at the time of publication.

Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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