Most institutional traders don’t want to engage in crypto, survey shows

Some 78% of institutional traders don’t plan to gain exposure to cryptocurrencies in the next five years, according to JPMorgan Chase’s e-Trading annual survey, while just 12% plan to trade them.

That’s despite the current positive sentiment across the space. For context, bitcoin (BTC-USD) surged 165% in 2023, mostly a result of speculation around the now-approved spot bitcoin exchange-traded funds. The highest-profile token pared back a notable portion of the gains after last month’s approval of the ETFs, until finding a level of technical support at roughly $40K.

From there, the coin reaccelerated to $47.3K as of Friday afternoon, making a higher-lows trend along the way. The swing comes amid concerns about U.S. regional banks, stemming from New York Community Bancorp’s (NYCB) Q4 earnings shock. During March’s regional banking turmoil, bitcoin rallied as investors, who lost confidence in the traditional banking sector, turned to the token as a hedge against uncertain times.

Crypto, though, appears to be too volatile for institutional traders’ liking. After 2021’s huge bull run, the crypto industry in 2022 suffered from a number of bankruptcies and wider risk-off sentiment across financial markets. A raging bear market ensued, with bitcoin (BTC-USD) and ether (ETH-USD) dropping 64.9% and 68.7%, respectively.

Still, of the 4,010 global institutional traders interviewed by JPMorgan, 9% said that they are currently engaged in crypto, up from 8% in 2023. The increase, though slight, might be fueled by traditional financial firms’ increased interest in the industry. BlackRock (BLK), Invesco (IVZ), Wisdomtree (WT) and Fidelity were among the financial giants that gained regulatory approval for their spot bitcoin ETFs.

While the price of bitcoin (BTC-USD) is difficult to predict, SA analyst Kennan Mell laid out several factors that could contribute to a continued rally, including the upcoming halving event (scheduled for April), potential interest-rate cuts this year by the Federal Reserve, a potential ethereum (ETH-USD) spot ETF, and overall positive investor sentiment.

Because of such developments, “bitcoin’s recovery from this sell-off is expected to be faster than previous sell-offs,” he contended in late January.

Interestingly, the J.P. Morgan survey participants appeared less optimistic about blockchain technology in 2024 vs. the prior year. Blockchain and distributed ledger technology fell in ranked performance to 7% from 12% in 2023. Instead, artificial intelligence and machine learning are the two technologies that are expected to have the most impact on trading over the next three years. Some 61% of respondents think that AI and machine learning would lead the pack, compared with 53% last year.