Institutional interest in crypto assets has “skyrocketed” in 2021 according to trading data from crypto exchange platform Coinbase.
Trading figures for the first quarter of 2021 show that the platform’s institutional holdings have risen by 170%, from $45 billion to $122 billion.
According to Coinbase head of hedge fund sales Drew Robinson, the rise in activity is largely down to greater understanding of the crypto market among institutional investors and the rollout of crypto ETFs which offer exposure to cryptocurrencies but with greater investor protection.
Research from elsewhere also shows that institutions were trading directly in cryptocurrencies in greater number in the early part of the year. According to analytics provider Apex:E3, 132, 594 bitcoins were purchased globally by institutional investors in Q1.
“Over time we have seen a variety of factors pulling institutional investors into the space; these range from hedging against inflation, diversification of corporate balance sheets and the desire for broader engagement in the digital economy, including areas such as payments, payroll and cross border payments,” said Robinson. “Client demand is also playing a significant role,” he added.
It remains to be seen whether institutional interest will increase similarly in subsequent quarters given the fluctuations in cryptocurrency values in recent weeks. Bitcoin is currently trading at $36,000 after hitting a peak of $63,000 in April, just ahead of Coinbase’s initial public offering (IPO).
Coinbase, which also has a crypto custody business, has seen its own value fall following the IPO. According to data from S&P Global Market Intelligence, Coinbase shares fell by 20.5% in May.