(Kitco News) After stellar rallies and impressive returns in 2021, the cryptocurrency space is ripe for a correction, according to a Natixis Investment Managers survey.
After being one of the most attractive assets to hold, with the total market cap breaching $3 trillion for the first time this year, digital assets are a “top contender” for a “major correction” in 2022.
The survey showed that out of 500 institutional investors polled, 72% said that cryptocurrencies are not appropriate investments for most retail investors.
At the same time, 28% of those surveyed said they invest in crypto, and a third of them planned to increase exposure next year.
Another 41% said they recognized cryptocurrencies as a legitimate investment while noting that central bank regulation will be required. More than 60% said that meme stocks would grow into even bigger bubbles next year, while 64% said that easy access to trading is creating a risk to retail investors’ financial security.
The institutions polled managed a total of $13.2 trillion in assets and were from 120 different countries. The list included four central banks, more than 20 sovereign wealth funds, and more than 150 corporate pension plans. The data was collected by CoreData Research in October and November.
Warnings of major selloffs in the crypto space are not new, with bitcoin famous for its intense volatility — rising from just below $5,000 in March 2020 to $69,000 in November 2021.
Just this weekend, bitcoin tumbled 20% in one hour to briefly trade below $47,000. Ethereum also tumbled to below $4,000. This crypto volatility came after a turbulent week in the U.S. stock market.
Year-to-date, bitcoin is up just over 68%, last trading at $48,209.10, and ethereum, the world’s second-biggest cryptocurrency, is up more than 477% year-to-date, last trading at $4,153.78.
More and more institutions are being attracted to the crypto space for its inflation hedge cryptocurrencies like bitcoin as well as more risk-on assets.
Other Natixis survey data revealed that monetary policy errors and supply-chain problems are more pressing risks for 2022 than the COVID-19 pandemic. New COVID variants were ranked third on the list of top threats for next year.
Inflation was the top portfolio risk identified by respondents. However, 60% of those polled expect price pressures to be transitory. According to Natixis, the other two portfolio risks were interest rate hikes and stock valuations.
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