Fidelity is Investing in Cryptocurrencies, So Should You.

darren
5 min readOct 2, 2021
freepik.com cookie_studio

Fidelity investments offer Financial Planning and Advice, Retirement Plans, Wealth Management Services, Trading and Brokerage services, and a wide range of financial services. Fidelity holds $11.1 Trillion of total customer assets.

Fidelity Digital was launched in 2018, the crypto division of Fidelity. In September 2021, Fidelity Digital released a digital asset survey. 11,000 firms in Asia, Europe, U.S. were surveyed. The firms were hedge funds, family funds, pension funds, endowments, foundations, and others, in Asia, Europe, U.S.

Methodology

The report is free to download:

Fidelity Digital itself is one of the largest traditional finance firms in the world, that has taken up investing in the cryptocurrency space. Fidelity Digital is growing at a rapid pace, needing to step up mass hiring due to crypto demand. The plan is to increase headcount to 250, from the current 150 employees. This shows that one of the biggest investment firms in the world is bullish in the crypto space.

I shall share some of the key findings from the survey below

Current Adoption Rate

CURRENT ADOPTION & CHANNELS TO EXPOSURE

In 2021, 52% of investors surveyed globally have an investment in digital assets, with Asia and Europe seeing higher rates of investment than the U.S. Asia leads in adoption rate with 71%, Europe at 56%, the U.S. at 33%. It comes as no surprise, as there has been a rift of concerns that cryptocurrency might face tough regulations. It is however notable, that U.S. firms’ adoption increased from 22% in 2019 to 27% in 2020, to 33% in 2021.

It is also interesting to note U.S. investors are more likely to have exposure to cryptocurrency via investment products such as Grayscale ETF and others. This is also again, possibly due to regulations concerns in the U.S. By purchasing an investment product rather than own the cryptocurrency itself, investors have to worry less about regulations. It seems the laws and regulations on cryptocurrency are much clearer in Europe and Asia, at the moment.

Ownership By Digital Assets

CURRENT ADOPTION & CHANNELS TO EXPOSURE

With no surprise, Bitcoin and Ethereum are the top two in ownership, the pair have been established as the leaders in the industry, so far.

Future Purchase Intent

CURRENT ADOPTION & CHANNELS TO EXPOSURE

Out of those surveyed, 71% indicated the intention to purchase digital assets, compared to 51% in 2020.

Firms that are already invested, comes mainly from Crypto Hedge funds, Crypto VC, high-net-worth individuals, who are most likely able to accommodate more risks in their portfolio and investing goals. It is not surprising Pension and Endowments are less likely to invest in digital assets because these funds are risk-averse.

Digital Assets in a Portfolio

DIGITAL ASSETS IN A PORTFOLIO
DIGITAL ASSETS IN A PORTFOLIO

In general, 8 out of 10 respondents felt the need to have exposure to digital assets in their portfolios. For the U.S and European investors, that belief increased from 65% in 2020 to 73% in 2021. In Asia, a whopping 83% feel the need to have digital assets in their portfolios.

Given the findings, the trend is apparent. More investment firms/funds are adding crypto to their portfolios, and more are intending to. The outcome of the survey clearly shows institutional investors are likely moving towards crypto adoption.

There are of course some reservations, on the rules and regulations regarding crypto. This space has been described as the Wild West and it is not surprising. Some regulations should be welcomed to protect investors, as long as innovation is not stifled.

Federal Reserve Chairman on Crypto and Stablecoins

On 30 September, Federal Reserve Chairman Jerome Powell said the U.S. did not have plans to ban cryptocurrencies. However, he did mention that stablecoins will be regulated which should come as no surprise. In my view, some regulations to ensure stablecoins are not minted from the thin air are welcomed.

Fidelity setting up a Bitcoin ETF

Besides the rapid expansion in Fidelity Digital, Fidelity is also setting up a Bitcoin ETF, which is pending approval from the SEC. Whether SEC approves the plan, remains a question. In fact, it seems Fidelity has been meeting with the SEC to push for the approval.

The ETF, if approved by the SEC, will track the performance of bitcoin as measured by the movement of the Fidelity Bitcoin Index, a barometer the investment giant established to track the price of the digital currency.

Fidelity’s Crypto exposure

Interestingly, Fidelity has been dabbling in bitcoin mining since 2015 at a small scale, it says. Clearly, Fidelity is not a stranger to the crypto space and has been in the space for 6 years. Fidelity chief executive Abigail Johnson often participates in startup demonstrations and educational talks related to cryptocurrency.

The size of Fidelity’s crypto portfolio is not known, but we do know Fidelity currently only offers Bitcoin to clients. Ethereum should be available to its hedge fund, family office, and institutional clients by the end of March 2022. As quoted from the president of Fidelity Digital Jessop says, Bitcoin may be the currency that initially draws people into the ecosystem, but institutions are starting to set their gaze beyond it on other opportunities in the digital currency market.

It seems the sentiments of Fidelity Digital are aligned with broader markets. Bitcoin and Ethereum are viewed as the ‘gold standard for crypto.

Should Retail Investors Like You and Me, Buy Crypto?

The short answer is yes( not financial advice). However, one should know the risks inherent in investments before starting. Price movement can be incredibly volatile. The crypto space is also infested with scams that look really convincing. Be mindful not to fall for those and always safeguard your investments.

Disclaimer: Always do your due diligence before investing in a stock. Investing of any kind involves risk. I am not a financial advisor. Your investments are solely your responsibility and I do not provide personalized investment advice. It is crucial that you conduct your own research. I am merely sharing my opinion with no guarantee of gains or losses on investments. Please consult your financial or tax professional prior to making an investment.

--

--

darren

Financial minimalist looking for the next investment opportunities