JPMorgan Chase & Co. on Wednesday published a survey stating 72% of institutional traders, out of the 835 surveyed, “have no plans to trade crypto” in 2023. But some industry experts say that this doesn’t mean crypto is dead.
The survey was conducted between Jan. 3 and Jan. 23, and included responses from 60 global locations. Only 8% said they are currently trading crypto and digital coins, and 14% said they plan to in the next 5 years.
“Crypto is not dead, it is just in a price discovery and regulatory and infrastructural “wait and watch”,” said Youwei Yang, chief economist at BTCM, a crypto mining company. “[P]eople have to be patient during the darkness before dawn […] because these developments have to be steadily established and strengthened after the series of mess happened in 2022.”
Yang is referring to the collapse of FTX, the crypto exchange that filed for bankruptcy in November, as well as the crash of cryptocurrency Luna in early 2022. Scandals and hacks in 2022 also took over $3 billion from victims who invested in crypto.
The current macroeconomic backdrop could help explain the statistic, said Tim Frost, CEO of digital wealth management platform Yield App, in an email to MarketWatch.
“Right now, those signals do not indicate a risk-on investment environment. Only in a very healthy macro environment would institutional investors such as JP Morgan and its contemporaries be allocating significant portions of their portfolios to higher-risk assets,” said Frost. “As such, this year, cryptocurrency will likely be low down on the list for such actors within the traditional finance sector.”
Technology consulting company Capgemini released a survey in 2022, and out of 2,973 global high-net-worth individuals polled, 71% reported investing in digital assets, and 91% of HNWIs younger than 40 reported having investments in digital assets, with cryptocurrencies listed as their favorite digital investments, followed by exchange-traded funds and metaverse investments. Cryptocurrencies, however, still made up a very small proportion of their entire portfolio.
“This [JP Morgan survey] seems very contradictory to the market. Traders love volatility, so why is crypto volatility any different from the volatility found in any other FX market?” said Stefan Rust, CEO of independent inflation aggregator Truflation, in an email to MarketWatch.
“There have been countless studies published that highlight the desire of ultra-high-net-worth individuals and family offices to allocate a small portion of their overall portfolio to crypto. Largely, I would say those investors would be targeting bitcoin
at this stage, as research into the altcoin market is still very nascent,” he said.
Jamie Dimon, JPMorgan Chase & Co. chairman and chief executive has long been a skeptic of cryptocurrencies, calling bitcoin a “hyped-up fraud” and a “pet rock,” as recently as January. Despite this, JPMorgan continues to explore cryptocurrencies, even registering a trademark for a crypto wallet in November.
Yang thinks that some of the hesitancy comes from the institutional infrastructure of crypto trading, and how it’s not ready on the compliance and legal side. “[A]s someone who had worked in the institutional environment, [I] would know how complicated the compliance and legal measure could be for a non-clearly identified and [un]regulated financial asset.”
Despite 2023 being an uncertain year, given that most central banks are closely monitoring inflation and the labor market, Yang still remains optimistic about the future of cryptocurrencies.
Others are waiting to see what happens with the macroenvironment.
“These institutions are also weary due to the current drawdown in pricing and require a much stronger thesis to enter the market than retail investors,” said Jan Sammut, vice president of marketing at Original Protocol, an Ethereum-based NFT and decentralized finance platform. “At the very least, they would want to see the Fed reducing rates.”