Several headwinds around the world have directly or indirectly affected digital assets. These include everything from inflation concerns, EU anti-crypto changes, to government bans. Whatever the reason, investors want to reduce their exposure to risky assets.
Do you want this, not that
This year, the price swings in January and February have caused investor perceptions to decline, favoring large capitalizations such as Bitcoin and Ethereum. A leading crypto asset manager, CoinShares, marked this scenario in a report dated March 29.
According to the report, investors tracked Bitcoin (BTC) and Ethereum (ETH) while reducing exposure to altcoins. Alt tokens such as XRP and smart contract-enabled blockchains Cardano (ADA) and Polkadot (DOT). This is evident from the graph below:
Nevertheless, a few altcoins have made headlines. Sentiment in Ethereum competitors such as Solana (SOL), Avalanche (AVAX), Cosmos (ATOM) and Terra (LUNA) has risen. Portfolio diversification is the main reason why investors consider such altcoins in their portfolios.
However, it is also interesting to see investors putting their money into cryptocurrencies as they see value in the new asset class.
All good and not bad?
Cryptocurrencies have enjoyed a significant amount of love and affection – that’s a fact. However, over the years, regulatory censorship has created hiccups. Investors reduced positions in digital assets with perceptions around politics.
Needless to say, government bans topped the list of critical risks.
[2/3] Investors are reducing their positions in digital assets, with perceptions around politics and a government ban at the top of the list of top risks. pic.twitter.com/uCeRCaXwdQ
— CoinShares 👩🚀 (@CoinSharesCo) March 30, 2022
The CoinShares survey found that the biggest risk in the eyes of investors was the ban on crypto assets by governments.
“This survey was conducted in the month of March 2022, as concerns about a Proof of Work (PoW) ban increased as a result of the vote in the European Union parliament. Also the anticipation around President Biden’s executive order.
This led to a political ban and a government ban that topped the list of top risks. Coincidentally, a PoW ban was not implemented and the executive order ordered several government departments to further study digital assets. †
Consider the drop in the stat to highlight this setback. The average portfolio weight in digital assets decreased from 0.8% to 0.5%. Watching with the fund flow, the report proposed,
“This decline was a combination of reducing positions and the effect of negative price action.”
This post How Cryptos Managed ‘Value-Based’ Investor Interests Amid Global FUD
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