Growing Adoption of Cryptocurrencies
More than 55 million Americans, which represents about 20% of the adult population, are now engaged with cryptocurrencies. In Europe, the figure stands at approximately 31 million users, or 25% of adults, while the United Kingdom sees around 12% of its adult population, equating to 4 million individuals, participating in the crypto space. Africa boasts 38 million users, and Latin America has about 55 million. Asia leads the charge with an impressive 263 million users across 48 countries. The global acceptance of digital assets is rapidly increasing, with the U.S. government actively promoting a more favorable regulatory environment through initiatives like the Genius Act for stablecoins and the SEC’s Crypto Task Force. SEC Chair Paul Atkins has articulated that self-custody of cryptocurrencies is a fundamental American liberty tied to personal freedom and property rights. Under Atkins’ leadership, the SEC has dismissed most lawsuits that were initiated during former chair Gary Gensler’s administration, signaling a shift towards more favorable regulatory attitudes. This evolving perspective among global regulators is largely influenced by potential economic growth, financial inclusion, and opportunities for wealth generation.
Professional Landscape Changing in Crypto
Recent estimates suggest that nearly half of the workforce in the cryptocurrency and digital assets sector comes from traditional financial markets, including prominent banks and asset management firms. Previously, there was a perceived risk for those transitioning from traditional finance (TradFi) to crypto, especially given the apprehension expressed by certain policymakers and regulators in recent years. However, institutional investment in cryptocurrencies is surging, with institutions reportedly holding around 25% of the U.S. Bitcoin ETF market. This influx of institutional capital is enhancing the credibility of cryptocurrencies and creating demand for TradFi professionals willing to commit to the expanding digital asset sector. Research from Nickel Digital Asset Management, a leading European digital assets hedge fund, highlights this transformation. Nickel Digital’s founders have backgrounds in major financial institutions, and their survey of institutional investors and wealth managers managing over $1 trillion revealed that 53% believe the career risks associated with crypto have diminished since the Trump administration, with 17% indicating a significant decline. Conversely, about a third of respondents felt that these risks have increased, while only 1% reported a significant rise. The perception of career risk is heavily influenced by the regulatory landscape, with 83% of those surveyed stressing the importance of regulation in mitigating these risks.
Pension Funds Entering the Crypto Market
Cartwright, a specialist in defined benefit and hybrid pension schemes, has made headlines by announcing the first bitcoin investment for an unnamed U.K. pension scheme. This strategic move aims to diversify portfolios by investing in an asset class noted for its unique risk-return profile. However, some critics have labeled this decision as “deeply irresponsible,” referencing the Ontario Teachers’ Pension Plan’s $95 million loss tied to the FTX collapse. Such criticisms overlook that the FTX bankruptcy stemmed from human fraud rather than inherent issues with cryptocurrencies or blockchain technology. In contrast, U.S. pension schemes remain unfazed, with notable investments in regulated crypto ETFs from Wisconsin and Michigan. States like Texas, Ohio, Pennsylvania, and Oklahoma are also contemplating the establishment of bitcoin reserves. According to Zodia Markets Ireland’s chair Michael Walsh, U.S. pension funds are currently purchasing about 1% of crypto ETFs, which, while seemingly minor, equates to over a billion dollars, indicating substantial growth potential. The trajectory for the crypto ETF market appears promising, as illustrated by BlackRock’s iShares Bitcoin Trust (IBIT), which recently acquired $970 million worth of Bitcoin in a single day.
Increasing Respectability in the Crypto Sector
Research from Nickel Digital among firms invested in digital assets indicates that the growth of the crypto market is enhancing its credibility. While market fluctuations are inevitable, a sustained sense of confidence is emerging as long as significant downturns are avoided. Nearly 88% of respondents indicated plans to increase their investments in digital assets this year, building on last year’s 67% who had already raised their investment levels. A majority expect traditional investor groups to follow suit, with around 70% anticipating a substantial uptick in pension fund investments in digital assets over the next two years. There is also considerable optimism about the market, as 90% of survey participants view digital assets positively, with 13% expressing strong enthusiasm. None of the organizations surveyed reported negative sentiments regarding the current market, and only 10% remained neutral. This growing confidence can be attributed to enhanced engagement with the digital asset industry, as well as a deeper understanding of the investment advantages beyond mere returns. The ability to trade continuously and the efficiency of the decentralized finance (DeFi) ecosystem were ranked as the top benefits, surpassing the potential for higher returns compared to other asset classes.
Regulation and Future Prospects
Nickel Digital’s findings reveal that 88% of participants believe the likelihood of another scandal similar to FTX has diminished, with 35% stating that the risk has significantly decreased. A similar survey conducted in July 2024 found that 75% of respondents felt the risk had lessened, with 20% indicating a sharp decline. Confidence in regulation is fostering increased participation from traditional financial firms, with 43% of institutional investors and wealth managers predicting a substantial rise in traditional firms launching crypto funds and investment solutions in the coming two years. This growing involvement from established institutions bodes well for the sector, as nearly 18% view the entry of major firms as very positive, while 74% consider it a favorable development. Performance remains crucial, with investors believing that cryptocurrencies will rank among their top five asset classes for risk-adjusted returns over the next five years. Private equity and emerging market equities follow closely behind in popularity. The journey toward respectability for cryptocurrencies has been lengthy, yet the immediate prospects for a downturn seem less likely according to most analysts. In contrast, the outlook for traditional markets remains uncertain.
