JPMorgan conducted an e-trading survey that involved 835 institutional traders from 60 locations. The survey aimed to get the views of traders regarding upcoming trends and hotly debated topics. The questions were not crypto-specific but rather aimed to get an idea of what developments can influence how institutions invest their money.
Let us take a look at some of the survey questionnaires and how they might affect the crypto space.
Recession Risk Will Affect the Market
The first question in the survey is:
Which potential developments will have the greatest impact on the markets in 2023?
- The table above shows what institutional traders think will have the most market impact. Recession risk in 2023 has been in the news for some time and it is not surprising that traders seem to agree. Economic activities, employment, and spending decrease in a recession. Less employment and spending means people will stick to basic needs, instead of investing in risky asset classes like crypto.
- Inflation is also something to watch out for. Generally speaking, higher inflation affects consumer confidence and spending. Less spending means less profit for companies which in turn negatively affects stock shares. Crypto prices also go down when the traditional market dumps.
- The war in Ukraine showed us how fragile the world economy is. Prices of commodities like oil and grains went up as a result of the conflict. This is a contributor to the inflation rate. At the moment we also have to be wary of a possible US-China conflict in the Indo-Pacific Region. A conflict between the two largest economies won’t be good for anybody.
- But we do have some good news since traders don’t think that the global pandemic is not something to worry about anymore. Economic activities can go back to normal without quarantine restrictions.
Artificial Intelligence Trumps Over Crypto
Question: In the next 3 years, which technologies will be most influential for trading?
Blockchain and artificial intelligence were tied at 25% each in the last 2022 survey. This recent result is not surprising since most people who have access to the internet already have some exposure to AI, courtesy of ChatGPT. Artificial intelligence is on its way to changing the way we learn and perform a task.
These results can probably trigger a lot of crypto maximalists, but we have to remember this does not mean that blockchain and crypto will take a backseat. This simply means that AI will probably be used as leverage to trade. Imagine using AI as a tool to analyze market trends.
Electronic Trading of Commodities, Stocks, and Crypto
Question: What percent of your trading volume is/will be through e-Trading channels? This includes API, multi-dealer platforms and single-dealer platforms?
E-trading platforms are online platforms that allow investors and traders to buy and sell financial instruments, such as stocks, bonds, currencies, commodities, and crypto electronically. These platforms are typically provided by brokerage firms or financial institutions and enable traders to execute trades from anywhere with an internet connection.
The table above is very interesting to the crypto community because it shows that traders are expected to increase their crypto e-trading volume transactions by 11% from 2023 to 2024. This sounds like institutions are still investing in crypto despite the bear market. This is congruent with what Cathie Wood is saying about bitcoin and crypto. An example is Blackrock’s Aladdin clients using Coinbase prime to access crypto.
Focus on Crypto
Question: Which of the following best describes your focus on crypto/digital assets?
Crypto investors will find the results from this question somewhat disturbing. It shows that 72% of institutional traders have no plans to trade crypto or any digital asset. Only a total of 28% are either currently trading crypto or have plans within 1 to 2 years.
Institutional investors have enough capital to pump any sector’s market capitalization. If these sentiments are true, then it might take a while before we see another crypto cap all-time high.
About JP Morgan
JPMorgan is a major American multinational financial Institution based in New York. It has more than 3 trillion dollars in assets. Its CEO, Jamie Dimon, is a known crypto skeptic. He even described Bitcoin as a pet rock.
Is it all Doom and Gloom for Crypto?
The bear market made risky assets like crypto too unpalatable to some investors. The fear and uncertainty were exacerbated by the implosions of several crypto projects and companies like FTX. Crypto regulations are also making matters worse. We cannot blame institutions for being too cautious.
On one side several institutions are also investing in crypto despite the bear market. Major players like Blackrock and Fidelity are deploying their resources into the digital assets space. These two giants alone have trillions of dollars under management. We can surmise that they have already done their homework.
The market is currently being hounded by news of recession and geopolitical conflicts. The 72% who decided not to invest in crypto are probably being cautious. But the respondents are also not the only entities who can bring capital into the space. Countries are also starting to embrace the digital asset space. Big financial institutions like Blackrock, Fidelity, BNY Mellon, and Ark Invest are investing in the industry.
The negative sentiment does not mean that they will never change their minds. Someday they will realize that they were avoiding an asset class which has a potential to change the financial landscape.
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Featured image from Unplash
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