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Institutional Crypto Trading: JPMorgan Poll Reveals Skepticism Among Traders in 2023

72% of Institutional Traders are Crypto-Skeptical this year: JPMorgan

Are institutional investors losing faith in the crypto market? Recent data from a JPMorgan poll suggests a significant cooling of interest in cryptocurrency trading among these major players. Let’s dive into the findings and explore what’s driving this cautious approach to digital assets in 2023.

Institutional Traders and Crypto: A Fading Affair?

A recent JPMorgan e-Trading Edit poll, the seventh in its series, surveyed 835 institutional traders across 60 countries to gauge their sentiments on market trends and technological impacts for 2023. The results paint a rather lukewarm picture when it comes to cryptocurrency.

The headline finding? A mere 14% of institutional traders expressed intent to continue or begin trading cryptocurrency in 2023. This stark figure, reported by JPMorgan and highlighted by BitcoinWorld, underscores a significant shift in institutional sentiment towards digital assets.

Let’s break down the key statistics from the JPMorgan poll:

  • 72% of institutional e-traders have “no intentions to trade crypto/digital currencies” in 2023.
  • Only 14% plan to actively trade or start trading digital assets this year.
  • Another 14% are on the fence, indicating potential interest in crypto within the next five years but not in 2023.
  • A whopping 92% of institutional traders reported having no exposure to the digital asset market in their investment portfolios at the time of the study (January 3-23).

These numbers clearly indicate a prevailing hesitancy among institutional traders to engage with the crypto market in the current year. But what’s behind this reluctance?

Why the Crypto Cold Shoulder? Market Turbulence and Liquidity Concerns

The JPMorgan poll sheds light on the primary concerns driving institutional traders away from crypto. The most cited challenge? Turbulent markets. Over half of the respondents identified market volatility as the biggest hurdle to successful daily trading.

Adding to the unease are liquidity worries. 22% of traders pointed to concerns about liquidity availability as a major factor hindering their trading performance. This is likely linked to the quantitative tightening measures implemented by the United States Federal Reserve in 2022, which can impact market liquidity across various asset classes, including crypto.

Furthermore, the timing of the poll is crucial. Conducted in January 2023, it followed a tumultuous 2022 for the crypto sector, marked by the dramatic collapses of the Terra (LUNA) ecosystem and the major crypto exchange FTX. These events undoubtedly shook investor confidence and contributed to a more cautious stance towards digital assets.

Beyond Market Jitters: Recession Fears and Inflation

Macroeconomic factors are also playing a significant role in shaping institutional trading strategies. Another JPMorgan Chase poll revealed that:

  • 30% of respondents believe recession risk is the most critical macroeconomic element to monitor.
  • 26% are most concerned about the impact of inflation on trade results.

These concerns are not unique to crypto but reflect a broader apprehension about the global economic outlook. In times of economic uncertainty, institutional investors often prefer to de-risk and allocate capital to more traditional and perceivedly safer asset classes.

Trading vs. Investing: A Matter of Perspective

It’s important to distinguish between trading and investing, especially in the context of institutional engagement with crypto. Trading typically involves short-term strategies, aiming to profit from price fluctuations within weeks, days, or even minutes. Investing, on the other hand, is a longer-term game, focused on holding assets for extended periods based on fundamental value and growth potential.

The JPMorgan poll specifically targets traders, indicating a focus on short-term market sentiment and trading activity. This might explain the more bearish outlook compared to studies focusing on longer-term institutional investment.

Contrasting Views: Long-Term Crypto Adoption Still in Play?

Interestingly, while JPMorgan’s poll highlights short-term trading skepticism, other studies suggest a continued, albeit perhaps more strategic, interest in crypto from institutional investors.

For instance, a Coinbase institutional investor study from last year revealed that 62% of institutional investors had invested in the digital asset market between November 2021 and late 2022. This period encompasses the so-called “crypto winter,” suggesting that a significant portion of institutions were undeterred by market downturns and maintained a long-term perspective.

Furthermore, more recent research from June indicates that 71% of high-net-worth individuals have already invested in cryptocurrencies, often opting for longer-term investment strategies rather than short-term trading.

These contrasting findings suggest that while short-term trading sentiment might be down, long-term institutional adoption of crypto as an investment asset could still be unfolding. The key difference lies in the time horizon and investment strategy.

Blockchain vs. AI: Tech Priorities in Trading

The JPMorgan poll also touched upon the perceived impact of different technologies on the future of trading. When asked about the most powerful technology shaping the future of trading:

  • 53% of traders favored artificial intelligence (AI) and machine learning (ML).
  • Only 12% selected blockchain technology.

This is a notable shift from the 2022 survey, where blockchain and AI each garnered 25% of the votes. The increased emphasis on AI and ML could reflect a growing focus on data-driven trading strategies and automation within institutional trading desks, potentially at the expense of immediate blockchain adoption for trading infrastructure.

Looking Ahead: Cautious Optimism or Continued Hesitancy?

The JPMorgan poll paints a picture of institutional traders approaching cryptocurrency with caution in 2023. Market turbulence, liquidity concerns, and macroeconomic uncertainties are weighing heavily on their short-term trading strategies. While short-term trading appetite may be subdued, other data points suggest that long-term institutional investment in digital assets might still be a developing trend.

Whether this hesitancy evolves into renewed interest will depend on various factors, including market stabilization, regulatory clarity, and the broader macroeconomic environment. For now, institutional traders appear to be adopting a wait-and-see approach to the crypto market, prioritizing risk management and navigating the complexities of a rapidly evolving landscape.

Disclaimer: The information provided is not trading advice, Bitcoinworld.co.in holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decisions.