Fidelity Says 90% of Their Biggest Clients Want Bitcoin Exposure

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Boston-based financial services corporation Fidelity revealed this week that 90% of its clients are interested in investing in Bitcoin and other cryptocurrencies. Founded in the 1940s, the private firm has $10.4 trillion in assets under management as of 2021.

In an interview with Boston Globe, Fidelity’s Head of Sales Christine Sandler said that the firm is dealing more with traditional investors, and the entry vehicle to this space is largely Bitcoin.

Tom Jessop, president of the digital asset business unit at Fidelity, also said that the firm is setting long-term goals on the emergence of a new kind of financial infrastructure around Bitcoin.

In response to a question about altcoin adoption, Jessop said, “I don’t think we’ll ever be the most full-service provider, in terms of asset coverage.”

Last month, Fidelity Investments bought a $20 million stake in Nasdaq traded Bitcoin mining startup Marathon Digital Holdings (MARA.) Furthermore, the firm added Marathon shares across its four index-based funds including the Fidelity Series Total Market Index Fund (FCFMX), Fidelity Extended Market Index Fund (FSMAX), Fidelity Total Market Index Fund (FSKAX), and the Fidelity Nasdaq Composite Index Fund (FNCFX).

Fidelity embraced the most volatile asset class six years ago. Its executives started mining Bitcoin and Ethereum in their offices for educational and experimental purposes.

“We set up a small Bitcoin and Ethereum mining operation…that miraculously now is actually making a lot of money,” Fidelity Chief Executive Abigail Johnson said in 2017.

Since then, the multinational financial services organization has been making venture investments in Bitcoin-related businesses. In 2018, the firm formally established its digital asset unit to offer crypto services to sophisticated institutional investors.   

Fidelity supports regulations

Jessop says they support regulations for crypto markets because regulatory oversight will enhance investors’ trust and help in growing the emerging market.

Moreover, Fidelity has been lobbying and educating lawmakers over the years. The firm is also a member of the Crypto Council for Innovation. Other key members of the council include Square and Coinbase.

“For this asset class to grow, and for investors to have trust in what we and others are doing, you need regulations commensurate with other asset classes,” he said. “We’re not saying that it should be overregulated, but we think that it should be regulated consistent with other financial products that consumers and institutions purchase today.”

Pandemic and currency devaluation back institutional adoption

The firm believes that pandemic-related economic disruptions along with the sharp Bitcoin price rise have helped attract institutional investors to the crypto markets. Rising inflation and currency depletion are among the factors behind institutional investor interest in 2020.

“What really got people off the fence was the pandemic, because you’ve got this scarce asset class — there will only ever be 21 million Bitcoin created — and an environment where our currency is being debased, and there’s a ton of money printing,” Jessop said.

As several hedge fund managers are considering Bitcoin as an alternative asset class and a perfect hedge against inflation, its adoption accelerated further at an institutional level in 2021.

According to a study by Fidelity’s cryptocurrency business, seven out of ten institutional investors expect to buy or invest in digital assets.

Interestingly, the survey further shows that around 90% of respondents, who are willing to invest in digital assets, hinted that their clients’ portfolios or companies are likely to include digital asset investments in the next five years.

Access for retail investors through Bitcoin ETFs

With 83.4 million customer accounts and 37 million individual investors, Fidelity is now planning to offer crypto exposure to retail investors. Fidelity, which filed an ETF proposal in March, seeks to list ETF shares on Cboe’s BZX Exchange.

“If someone just woke up one day and said, ‘I need to have exposure to Bitcoin,’ their options are limited,” said Sandler. “The ETF would be a much more accessible product.”

Up to now, the SEC has declined several Bitcoin ETF requests, with dozens of applications still under review.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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