Four out of five of high net worth individuals (HNWI) and family offices are already invested in digital assets
The largest study this year which surveyed 1,500 international investors on their attitudes and investment strategies with respect to digital assets was published Matrixport, one of the world’s largest digital assets financial services ecosystem named by CB Insights as the 50 most promising blockchain companies in the world in 2022. Titled the “Private Wealth in Digital Assets Study 2022,” the study’s respondents consisted of single and multi family offices, high net worth individuals (HNWI) and mass affluent individuals (MAI) across five international wealth management hubs — Singapore, Hong Kong, Taiwan, Australia and the United Kingdom.
Commissioned by Matrixport and produced by FT Longitude, the specialist research and content marketing division of the Financial Times Group, the study found that 80% of HNWIs and 70% of family offices said they were either very interested or highly interested in digital assets and four out of five HNWI and family offices have been investing in digital assets in the past year. Less than 7% of HNWI and only 10% of family offices were uninterested in investing in digital assets. These sentiments remained largely the same even after a significant drop in the market capitalization of digital assets in the wake of the Terra Luna collapse in May 2022.
Digital assets have also continued to attract the attention of MAI, catching up to other investor types in terms of interest in investing in the asset class. While only one in four were interested before the digital asset market capitulation in May 2022, half now say they are keen to have digital assets as part of their portfolio.
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Eugene Lim, Head of Private Wealth, Matrixport said: “Despite the gloomy market outlook, we have continued to see an influx of large investors in digital assets. Understanding the key factors encouraging investors to consider the asset class, and identifying gaps discouraging adoption, was our motive in commissioning the study. The report uncovers valuable insights about what’s important in driving acceptance and legitimacy of the asset class, and what it takes for our industry to mature.”
Laura Adcock, Group Editor, FT Longitude, said: “This study looks in depth at how investors think and feel about digital assets. It covers a unique year and gives us valuable perspective into investor sentiments before and after the crypto crash. In-depth interviews conducted with key industry stakeholders supplement the data with valuable qualitative insights, which has dramatically enhanced the quality of the narrative.”
A closer look at respondents’ behaviours led us to identify three distinct investor archetypes — the Sophisticated, the Experimental and the Sceptical, based on their level of interest and the proportion of digital asset holdings they had in their investment portfolios. The study examines the current landscape and the future outlook for the digital asset class through the lens of these archetypes.
Investment strategies are evolving
The majority of sophisticated and experimental investors, who hold up to 25% or more of their assets in digital assets, indicated that their investment strategies are maturing as they become more familiar with digital assets. In particular, these investors seek a broader range of investment products that suit different risk profiles. In terms of channels to make their investments, they preferred digital asset-native intermediaries such as crypto asset managers over traditional wealth managers or banks.
User experience is key to mass adoption
Participants in the survey, HNWI, MAI and family offices — all wanted better ways to invest and identified easier technology platforms as the biggest factor influencing digital asset adoption. This finding highlights the importance of accessibility, akin to the way smartphone-enabled mobile banking applications have transformed banking services. Other factors driving adoption were — the entrance of long-term investors, traditional financial institutions offering digital assets services, and increase of use cases for digital assets.
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Digital assets complement traditional portfolios
The study indicated that investors are looking at digital assets as a way to construct more resilient portfolios with some investors indicating that they were motivated by the potential that digital assets could offer better returns than traditional assets. Particularly, sophisticated investors and younger investors pointed out several push factors caused in part by traditional finance, which were increasing their appetite in digital assets — such as perceived abuse of government control through the banking system and debasement of paper currencies.
Outlook: Regulation and education to shape the future of digital assets
The study found nearly half of investors expect that most assets in the future will be digital, and likely that incoming regulations will help to stabilise the market. Sophisticated and sceptical investors shared that internationally coordinated regulation would increase their confidence and appetite for digital assets. Industry experts further shared that regulations will establish clear rules of engagement for the sector, such as Singapore’s proposal to introduce digital asset risk tests for investors and risk disclosure guidelines for services providers.
With one in three investors admitting to investing in digital assets without fully understanding the assets, the importance of guidance and education brings this aspect into focus. Investors cited key barriers to investing included risk of fraud, cybersecurity risks, market volatility and lack of understanding of the asset class.
Interestingly, many investors looked to regulators to educate them about digital assets. However, industry experts shared that regulators are only beginning to learn more about the asset class themselves, and held the view that digital assets-native industry players need to work together to bridge this gap. Industry players within the digital assets ecosystem, such as Matrixport, are stepping in to fill this gap and educate the next generation of crypto natives.
Eugene Lim added, “As one of the leading digital asset managers in the digital assets ecosystem, Matrixport is confident that the study acts as a compass to guide investors on their goal to generate long term wealth in digital assets; and for the industry, the way forward to build a sustainable asset class grounded on investment expertise, trust, and professionalism.”
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