The Metaverse, a virtual world where people can interact and participate in various activities, has captured the attention of consumers and executives alike. A recent McKinsey survey shows that over $120 billion has already been invested in the Metaverse, more than double the amount invested in 2021. The study also found that 95% of business leaders believe the metaverse will have a positive impact on their industry in the next 5-10 years.

According to a recent McKinsey survey of 3400 consumers and executives, $120 billion has already been invested in the Metaverse by Corporations, VC, and PE in 2022, more than double the $57 billion invested in all of 2021.20 A large part of it is driven by Microsoft’s planned acquisition of Activision for $69 billion. The study also found that 95% of business leaders expect the metaverse to have a positive impact on their industry within five to ten years, and 61% expect it to moderately change the way their industry operates.

Consumers and brands are already engaging

McKinsey estimates Metaverse to have a market impact of $5 trillion by 2030:

• Between $2 trillion and $2.6 trillion on e-commerce
• $180 billion to $270 billion on the academic virtual learning market
• $144 billion to $206 billion impact on the advertising market
• $108 billion to $125 billion impact on the gaming market

The main reason that NFTs and Metaverses are important for institutional investors, is that consumerled marketing is a growing and powerful method for reaching customers. Brands and projects that activate consumer-led and personalized marketing will have more engagement and higher conversion rates. Since these assets are on the blockchain, investors can earn real ROI by understanding which NFTs and Metaverses will go viral.

The Metaverse is expected to have a significant market impact in the coming years, with McKinsey estimating its value to be around $5 trillion by 2030. The growing trend of consumer-led marketing and the rise of NFTs have made the Metaverse an attractive investment opportunity for institutional investors. With real returns on investment possible through understanding which NFTs and Metaverses will become popular, the Metaverse is a space worth paying attention to.

This article is an extract from the 70+ page Institutional Demand for Cryptocurrencies Survey co-published by the Crypto Research Report and Cointelegraph Consulting, written by multiple authors and supported by Flow Trader, sFox, Zeltner & Co., xGo, veve, LCX, Finoa, Lisk, Shyft, Bequant, Phemex, GMI.

Institutional investors have always been a driving force in the crypto market and it’s no surprise that they are primarily holding Bitcoin and Ether. However, as the market for NFTs has grown, institutions are also showing interest in security tokens, stablecoins, and other digital assets. This blog post will explore the current sentiment of institutional investors towards NFTs and what we can expect to see in the future.

It should come as no surprise that professional investors are primarily holding Bitcoin (94%) and Ether (75%). In addition to the two top digital assets when measured by market capitalization, institutions are also interested in security tokens (31%) and stablecoins (31%). Smaller holdings included Polkadot (DOT) (25%), Solana (SOL) (13%) and Litecoin (LTC) (13%). Several investors mentioned they are also interested in publicly traded blockchain stocks. 

When Visa bought a CryptoPunk NFT in August 2021, the purchase created a lot of waves. The company stated that it saw NFTs as a “promising medium for fan engagement.”

Top-tier auction houses Sotheby’s and Christie’s featured eight-figure NFT auctions as the market for natively digital art with blockchain-proofed ownership heated in the summer of 2021. Sotheby’s natively digital auction line featured NFTs from Pak, LarvaLabs and Xcopy, while Christie’s sold Beeple’s “Everydays: The First 5000 Days” for $69 million and curated its “Encrypted” digital art series.

But not all institutions are bullish on NFTs. When ConstitutionDAO, an ad-hoc group of private investors, tried to purchase an original copy of the United States constitution, it was outbid by hedge fund titan Kenneth Griffin. ConstitutionDAO raised $47 million from private investors at an average contribution of just $217. But the transparent nature of its efforts meant that other bidders knew exactly how high it could bid.

We see future NFT demand by institutional investors to fall into two categories:

1. Acquisition of “blue-chip” NFT projects, similar to Visa’s purchase of a CryptoPunk.
2. NFTs as certificates of ownership of other underlying assets. 

Number two has been spearheaded by Uniswap, where a user receives an NFT representing their liquidity position. Since some liquidity providers can be extremely profitable, these “utility NFTs” can represent ownership of a yield-bearing asset. 

Overall, the interest and sentiment of institutional investors for NFTs is positive. However, without a solid regulatory framework and likely without deeper liquidity and more sophisticated instruments, institutions will not invest heavily in NFTs.

The interest and sentiment of institutional investors towards NFTs is positive, but without a solid regulatory framework and deeper liquidity, institutions will not invest heavily in them. We expect to see institutions acquire “blue-chip” NFT projects and use NFTs as certificates of ownership of other underlying assets. The future of NFTs is promising, but it will take time and development before they become a mainstream investment option for institutions.

This article is an extract from the 70+ page Institutional Demand for Cryptocurrencies Survey co-published by the Crypto Research Report and Cointelegraph Consulting, written by multiple authors and supported by Flow Trader, sFox, Zeltner & Co., xGo, veve, LCX, Finoa, Lisk, Shyft, Bequant, Phemex, GMI.

As digital assets continue to grow in popularity, asset managers around the world are increasingly interested in understanding the best approaches for investing in these new types of assets. A recent survey reveals that risk-return ratio is the most important factor for allocating assets to digital investments and that clients requesting such investments are not a major influence. In this article, Thomas Zeltner – an experienced investor with a portfolio containing cryptocurrencies – shares his insights on why he decided to invest part of his assets into crypto and how his team allocates resources accordingly.

According to the survey results, the most important consideration for investing in digital assets is their risk-return ratio as 44% of respondents rated this characteristic as “highly important.” Most of the responses to “diversification” and “my company is convinced that the technology will be important in the future” are clustered in the middle and slightly skewed to the right of the importance spectrum, meaning that these factors are moderately important. Notably, the survey shows that clients requesting digital assets are not very relevant to the asset managers’ decision to invest in these assets.

Why did you decide to allocate part of your family assets to cryptocurrencies?
Thomas Zeltner: First of all, a 2–3% allocation to Bitcoin in a standard 60/40 portfolio would have increased its Sharpe Ratio significantly. Secondly, cryptocurrencies are a unique diversification opportunity. And finally, every family should invest some of its assets in future technologies.

How do you allocate assets to crypto?
Thomas Zeltner: We weren’t happy with the solutions on the market, as we were looking for active solutions managed by fund managers we trust and at a fair cost. So, we created our own actively managed certificate and hired Demelza Hays, an excellent crypto portfolio manager who we trust and has a fantastic track record. In addition, we needed a bankable product to ensure a scalable process across all our clients’ portfolios.

What percentage of their portfolios should professional investors allocate to invest in crypto?
Thomas Zeltner: This really depends on the personal risk profile and the market outlook. Our peers usually allocate less than 1% or even 0% to the crypto market, while we recommend between 3% and 7% depending on multiple factors. We currently view cryptocurrencies as neutral, but increasingly bullish. We are, therefore, allocating 5%.

How does your crypto portfolio management work?
Kim Wirth: Our performance is a combination of cryptocurrency exposure, staking rewards and premium generation from market-neutral derivative strategies. We follow a coresatellite approach where we invest in large coins, like Bitcoin or Ether, as our core and various smaller altcoins as our satellite. In addition, we apply an actively managed rebalancing strategy that has been designed to exploit cryptocurrency volatility while reducing risk and maximizing the long-term upside.

What coins are you investing in?
Kim Wirth: We currently diversify across three categories. Layer-1 and layer-2 coins as well as exchange cryptocurrencies. We also trade derivatives to implement certain strategies, such as hedges.

How do you manage the risks of crypto exposure from a portfolio point of view?
Kim Wirth: To start with, the crypto product itself can go market neutral or even short if we are bearish. In addition, we optimize our tactical weights for the crypto exposure to manage our overall portfolio volatility. In addition to this, rebalancing is still one of the most powerful tools when used correctly.

How does your cryptocurrency research work?
Kim Wirth: We have a bottom-up approach, which we use to generate a pool of coins and projects which are reliable and promising from our point of view. We then track these coins by using quantitative signals to decide when to buy and when to sell. On top of this pool and these signals, we draw a macroeconomic picture of the world to decide whether we are bullish or bearish on the overall crypto market. This is where we decide what percentage we will allocate within the predefined pool of coins and how much we will invest in the market-neutral strategies consisting of futures and options.

It is clear that when it comes to digital investments, investors must carefully consider their risk-return ratio and diversification opportunities before making a decision. Furthermore, having trusted fund managers who have a good track record can help ensure successful allocation of resources. There is no one-size-fits-all approach as every family’s needs are different. However, taking these factors into account can help families make educated decisions when investing their money into digital assets like cryptocurrencies.

This article is an extract from the 70+ page Institutional Demand for Cryptocurrencies Survey co-published by the Crypto Research Report and Cointelegraph Consulting, written by multiple authors and supported by Flow Trader, sFox, Zeltner & Co., xGo, veve, LCX, Finoa, Lisk, Shyft, Bequant, Phemex, GMI.