The opinion of institutional investors of OKX on crypto

A recent research by OKX has revealed that institutional investors consider the adoption of crypto as “inevitable”.

In this regard, they are planning to increase their allocation in crypto in the short and medium term.

The research of OKX and the opinions of institutional investors on crypto

The research is called Digital assets as the new alternative for institutional investors. It was commissioned by OKX and was carried out by Economist Impact.

He examined asset allocation, custody, regulation, and risk management with particular attention to institutional investors considering digital assets, including cryptocurrencies. 

He also examined liquidity, market integration, and regulatory compliance. 

The conclusions of the research are based on insights conducted through interviews with business leaders in digital assets and finance, including Citi, Al Mal Capital, Skybridge Capital, VanEck, and others. 

The objective was to highlight the point of view of institutional investors on digital assets, and what emerged is that they consider them an inevitable opportunity and a promising asset class destined to grow substantially in the future.

OKX 

OKX is one of the main crypto exchanges in the world. 

It has a daily spot trading volume exceeding 2 billion dollars, in line for example with that of Coinbase. 

However, it is mainly used for the exchange of derivatives, such as futures, where it reaches and exceeds 18 billion dollars in monthly volume, significantly surpassed only by Binance. 

It was founded in 2017 in China, by Star Xu, but from the very beginning it operated internationally. After the crypto ban in China, it effectively stopped operating in its home country and further extended its operations throughout the rest of the world. 

The registered office is in the Seychelles, but the operational headquarters is in Dubai. However, it also has offices in Singapore, Hong Kong, USA, and the Bahamas. In particular, the Hong Kong office, which is Chinese territory, could allow the company to easily re-enter the Chinese market in case of the ban being lifted, even though in May it has, for now, given up on obtaining the license.

It hosts over 700 spot trading pairs, and over 280 derivative instruments with leverage up to 125x on the main future contracts.

Note that OKX Institutional provides crypto trading solutions specifically to institutional investors, with an infrastructure created specifically for them. It offers advanced features, custody solutions, and risk management tools. 

To institutional traders, it also offers on-demand access to the deep liquidity of OKX, thanks to the specific Nitro Spreads service, for the execution of basis strategies, future spreads, and funding rate arbitrage. 

Institutional investors

The research commissioned by the exchange reveals that there are four crucial areas of interest for institutions considering entering the digital asset market. 

These are: asset allocation, custody, regulation, and risk management. 

Besides these four, there are three other important factors for their entry into the crypto market, namely liquidity, market integration, and compliance.

The most interesting thing that emerged from the research is that among institutional investors there is a growing consensus that digital assets (in particular cryptocurrencies, NFTs, and tokenized private funds) will have an important place in the asset allocations of their portfolios in the future. In fact, 69% of institutional investors plan to increase their allocations in digital assets and/or related products in the next two or three years. 

Currently, the overall average allocations are generally limited to a range between 1% and 5%, but it is expected to increase to 7.2% by 2027. To achieve this, they foresee a series of investment strategies, such as spot allocations in cryptocurrencies (considered by 51% of the investors surveyed), staking of digital assets (33%), and investments in crypto derivatives (32%). It is noteworthy that, although the report takes into account all digital assets, including NFTs, these three strategies exclusively concern cryptocurrencies. 

The institutional crypto market

Isolating institutional investors within the crypto markets, it emerges, for example, that the institutional custody market for digital assets is expected to have a compound annual growth rate of over 23% until 2028. 

This is a truly significant growth for an institutional market, especially because 80% of the hedge funds that invest in digital assets use a third-party custodian. 

Furthermore, a positive trend of convergence of local and regional regulatory frameworks has been identified, such as that of the EU (MiCA). This is creating a path for the global adoption of criptovalute.

Moreover, even the crypto exchanges themselves have recognized the need to respond flexibly to local regulatory requirements. This is to balance the need to grow with the need to maintain market integrity.

The comment

The Chief Commercial Officer of OKX, Lennix Lai, stated: 

“This initiative to involve the world’s leading institutional investors demonstrates how digital assets are rapidly being adopted into investment portfolios. The trend will only intensify if we see progress in blockchain technology, greater regulatory clarity, and the adoption of innovative digital solutions such as real-world tokenized assets [RWA]. Our collaboration with Economist Impact demonstrates OKX’s commitment to promoting a deeper understanding and adoption of digital assets among institutional investors worldwide.”

The head of globalization, trade, and finance at Economist Impact, John Ferguson, added: 

“Given that digital assets are gaining importance in financial markets, regulatory standardization and sophisticated custody and risk management solutions tailored for digital assets are crucial considerations for institutional investors. This research summary, sponsored by OKX and developed by Economist Impact, aims to provide institutional investors with insights into recent trends, ongoing challenges, and emerging opportunities related to digital assets as they navigate this rapidly evolving ecosystem. The findings also highlight the powerful role that technology-based solutions can play in incorporating trust in digital assets among these investors.”