 Despite the crypto bear market, institutional investors are still here and they are buying the dip. According to a recent survey by Fidelity Digital Assets, 58% of institutions have already invested in crypto and 74% plan to do so in the future. But why are big investors betting on crypto despite the market downtrend? What specific assets is the money flowing to? And what does this trend mean for the broad market? To answer these and more questions, we sat down with Chris Kuiper, the head of research at Fidelity Digital Assets. Before we get started, as always, consider leaving a like and subscribing to our channel. I'm Giovanni, welcome to another Cointelegraph interview. Despite the market downtrend, we are seeing an increased participation of institutional investors in crypto in 2022. How do we make sense of this trend? So it's very surprising to us to see these results, to see institutional adoption increase in terms of the number of people who are allocated. So that's now at 58%. Globally are allocated to digital assets in some form. That's up 6 percentage points. And other things like their perception of digital assets increased, 74% said they intend to allocate in the future. And so to get to your question of why that is, I mean, some of it is a little bit of speculation. But from what I can see and from the people we talk to, it's really about people coming along this educational journey, understanding the core value proposition of digital assets, and continuing to allocate even in a bear market, perhaps even seeing this as an opportunity to add to their exposure or get exposure now that we're in this bear market. But really, they're agnostic to some of this crazy volatility and price because they're looking at it from a very long-term perspective. They're looking over the next years, five years, decade or more. And so I think that's how you kind of square some of these results that we're seeing. When you talk about institutions, what entities are we actually talking about? And can you give us a bit more details about the methodology that you used for your study? Yeah, absolutely. So in terms of our methodology, it was similar to previous years, we'd like to try to stay consistent so we can see that trending data. So we had once again over 1,000 participants, about 1,050 this year. And this is from the three regions of the US, Europe and Asia. We've continued to expand the survey to more regions in past years. And in terms of the makeup for institutional, this is primarily investment advisors, high net worth individuals or institutions, family offices, crypto native hedge funds, as well as traditional hedge funds and some venture capital funds. And then of course, a lot of pensions, endowments and foundations which you traditionally think of. So when you say that institutions are betting more and more on crypto, what specific digital assets are we talking about? What are the cryptocurrencies that institutions are mostly interested in? I can tell you at a high level, Bitcoin remains number one, Ethereum remains number two, not surprisingly. And we did see a pretty big increase in Ethereum comparing it to previous years, particularly in Europe. We actually saw the percentage of respondents saying they were invested in Ethereum or Ether. The token obviously double from two years ago. So that was an interesting thing to call out there. There are a lot of other tokens and currencies that people did cite as having exposure to or ownership to, but they tend to be pretty small. And the other thing I would say is it tends to be more of the Asia region. These are the respondents that responded more favorably to things like DeFi and tokenization, things a little bit more out on that spectrum in terms of complexity and cutting edge. So do you think there is a trend there? Do you think that more and more institutions are switching their attention from Bitcoin to Ethereum, perhaps following the merge that happened not long ago? This survey was fielded the first half of the year, so obviously pre-merge. So it was not already successfully done, but of course there was a lot of interest and momentum going into that. And so it'll be interesting to see next year's survey if the merge impacted it. But anecdotally, I can say we are seeing more interest from institutions because you now have a clear differentiator between Ethereum and Bitcoin in terms of not only the environmental narrative, but also this transition to potentially having a yield bearing asset. And so we're still very early age stages of this. I wouldn't say we've seen a big flow or a huge pickup, but I think institutions are coming around now that the merge is behind us and that uncertainty is taken out of the equation. They're now looking deeper into this and thinking about whether or not it makes sense to make some allocation towards Ether as well. Now I would like to ask you what are the main reasons why these institutions are betting on crypto? Yeah, so every year we track what is the most favorable characteristics, so kind of a ranking. Number one is high upside potential. That's the most cited one by our respondents. Number two is a technology play. And number three is enabling decentralization. And then the other ones are things like free from government intervention, uncorrelated to other assets, which even after this past year where we've seen correlation go up, although this decline is still the fifth or sixth cited reason, which I thought was really interesting. And then macro inflation play was also in in that top six or seven cited reasons as well. So when we look at the broad crypto market, how significant is the presence of institutions and how is this increased participation from their side going to impact the price of crypto? Yeah, that's certainly a difficult question to try to answer. But I can say just looking at the data, the survey, it looks very favorable that a lot of institutions are already invested. So some people might say, why haven't we seen more price appreciation because of this? I think you have seen it. You've seen some support, especially in the recent bear market here, a little bit more of a support from the demand side. But also you have to look at the breakdown, the ones that are only single digit respondents to having allocation or exposure, the pensions, the endowments, the foundations, those tend to be a higher amount of money in terms of how much they manage. So I think you'd have to look at it a little more on a weighted basis that that might be going on there as well. But we're going to continue to dig into this data to try to answer that. But overall, to answer your question on how this could impact it, I think you got to step back and just say, look at the trending data, look at how many institutions are now aware of it, have positive perceptions to it. And it just takes time. It takes time for them to get their investment committees on board, to educate their board and committees on how this works or where it fits. They've got to do the nuts and bolts of the compliance and the reporting and how things are custodied and all that stuff. So that takes time, but it's all happening. It's all going on in the background. Every day, someone else is learning more about this, figuring out operationally how to do it. And so I think you will continue to see that trend continue and that kind of starts to compound that additional demand in the long term. So you were telling us about the main reasons why institutions are increasingly involved in cryptocurrencies. Perhaps now you could tell us about the main obstacles that still prevent these players from embracing the space. As you said, price volatility, number one, once again, not surprising, right? And so there's two ways to look at this. Number one, I think you can say certain things about volatility. We've written pieces on it, why things like Bitcoin are inherently volatile. Remember, they said the most cited favorable characteristic was high upside potential. Well, those two are kind of joined at the hip, right? High upside potential, you got to pay the price with a lot of volatility. There's no free lunch. But some of the other things, like there's no valuation metrics or models to evaluate this, we don't think that's entirely true. My colleague, Jack Newrider, just put out a piece a few months ago on valuing Bitcoin, providing a couple models to think about how to value Bitcoin. And we'll continue to put out research on how to value some of these other tokens and projects. And then going down the list, a lot of things were around complexity, security. Regulation was up there, but it was actually number seven. So not as high as what people would think. And so I think there's still this big opportunity for education to get people comfortable with the complexity, to get them comfortable with how to secure these assets. And so I think those things can be addressed through more education and research, whereas something like volatility, at the end of the day, it is what it is in the current state of this still nascent market. Awesome. That was a great insight in the behavior of institutional investors in crypto. I look forward to see your next survey that will review the second half of 2022 and see how things will have changed by then. Thanks a lot, Chris, for coming on our show. Absolutely. My pleasure. Thank you so much.