Professional and wealthy investors still plan to boost crypto holdings even after sharp slide
By Jules RimmerMorgan Stanley analyst says crypto trades on four-year cycle tied to money supplyMorgan Stanley and Sygnum Bank both agree that crypto is no longer a speculative bet only; it's developed an institutional following.The recent drop in crypto prices isn't denting enthusiasm from wealthy and professional investors to boost allocations.Bitcoin (BTCUSD) was trading around $105,000 on Wednesday, having reached over $126,000 last month, with other cryptos like Ethereum (ETHUSD) and XRP (XRPUSD) also sharply below their peaks.A survey conducted by Zurich-headquarter Sygnum, which bills itself as the world's first regulated digital asset bank, found that 61% of the more than 1,000 high-net-worth and professional investors it surveyed in 43 countries plan to increase their exposure to cryptocurrency.That crypto push might not come right away. Noting the crypto asset class lost about $500 billion in market value during October, Sygnum's survey found that investors were uncertain about making fourth-quarter allocations to crypto and the outlook for 2026 was neutral to somewhat negative.As a store of value, respondents regard bitcoin (BTCUSD) as superior to other altcoins, owing to first-mover advantage and that with widespread concerns about inflation, de-dollarization and sovereign debt concerns, its alleged safe-haven characteristics are appealing.Beside the current nervousness about weak pricing and the drive for diversification, Sygnum identified a clear trend for active management strategies among inventors, that inflows to exchange-traded funds would increase if staking - the process by which a network rewards a crypto user for putting it on their blockchain - were allowed and that direct token investments were most popular.Morgan Stanley's regular "Thoughts on the market" podcast aired Tuesday and treated the subject of "crypto goes mainstream." Research and investment management analysts Mike Cyprys and Denny Galindo also observed the "sea change" in the approach of investors to the crypto asset class and remarked that a big factor in the sudden intensification of this trend was the U.S. presidential election last year.The advent of the Trump administration brought about regulatory changes and new legislation like the Genius Act which have helped to make crypto an investable asset class for institutional investors. Galindo points out most of the interest has focused on bitcoin with some recent curiosity about the introduction of stablecoins.For Cyprys the key shift is the accessibility and ease of investment provided by exchange-traded funds. To illustrate how it's become mainstream he comments how the Securities and Exchange Commission now has a generic template and process for listing requirements for crypto ETFs and how this investment pool has expanded to $200 billion with $40 billion inflows in 2024 (when they were finally authorized) and $45 billion this year. The issuers of these ETFs are well-established household names like BlackRock, Fidelity and Invesco.While acknowledging it's still early days for the asset class, Galindo splits potential investors into three buckets: those who view bitcoin as digital gold, those who regard it as a "venture capital... like a disruptive innovation in tech" and those who are attracted to its decorrelation with other assets and its appeal therefore as a portfolio diversifier.Galindo believes there's a four-year cycle in crypto that often chimes with global trends in M2 money supply. Right now, he thinks bitcoin may be toward the end of that cycle and so a dormant period, or a time of consolidation is what we are presently seeing in price behavior.-Jules RimmerThis content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.