Interestingly enough, when asked about their personal investments, 40% of them were actively trading cryptocurrencies.
A survey conducted at JPMorgan’s Macro, Quantitative and Derivatives conference, attended by approximately 3,000 investors from around 1,500 institutions, found that nearly half label cryptocurrencies as “rat poison” or a temporary fad.
Only 10% percent of institutional investment firms surveyed by JPMorgan trade digital assets. Of the remaining 90%, four in five have no plans to enter those markets, whatsoever.
Interestingly enough, when asked about their personal investments, 40% of them were actively trading cryptocurrencies, according to the survey released on Tuesday. As to fraud, 95% of those surveyed believed it was “somewhat or very much prevalent” in the crypto space.
Regulators are expected to get tougher on the nascent industry. Four-fifths of investors are counting on stricter enforcement as the ecosystem matures and no longer has the excuse not to fall in line with the other asset classes.
While JP Morgan and its partners are institutionally staying back from the crypto markets, the investment bank is very much into blockchain technology. It has invested in R3 Corda’s blockchain-powered securities finance startup HQLAᵡ, it is testing digital currencies with Bahrain ahead of a CBDC project, and it was the first to manage collateral with Baton Systems’ shared ledger.
Crypto assets have come under pressure since last week, with Bitcoin temporarily stepping down below the $30,000 mark. The crypto market cap remains under the $1.5 trillion line, with a few of the top 10 assets (Ripple’s XRP, Dogecoin, Polkadot, Uniswap), staying down by at least 25% when compared to last week.
The downward spiral is said to have been triggered by China’s deepening crackdown on mining and trading cryptocurrencies, but it is well known that the much-unregulated space has allowed retail traders to gain exposure with extremely high leverage, particularly in Asia Pacific jurisdictions.
“While this allows for greater gains in speculative trading, it also accelerates losses exponentially”, said Natallia Hunik, Chief Revenue Officer at Advanced Markets.
“The type of volatility that we see in crypto assets is non-customary where traditional financial instruments are concerned so, given the combination of lower liquidity than traditional assets and higher volatility, overleveraged crypto trading has a greater chance to create a cycle, or trend, and to ultimately drive the price of the crypto asset down.”
Michael J. Burry, a famous ‘perma-bear’ who became a legend for shorting the housing market in 2007 and portrayed by Christian Bale on The Big Short, has recently warned that the “mother of all crashes” is coming.
“The problem with #crypto, as in most things, is the leverage. If you don’t know how much leverage is in crypto, you don’t know anything about crypto, no matter how much else you think you know.”