Potential for strong growth in the UK’s crypto asset marketplace, study finds

By Gaia Lamperti

According to London-based Nickel Digital Asset Management (Nickel), Europe’s largest regulated digital assets hedge fund, the UK is one of the most attractive markets for hedge fund managers focusing on crypto and digital assets.

New research conducted by the firm revealed potential for strong growth in the sector as a survey with 23 institutional investors and wealth managers in the UK revealed that they collectively foresee $66.5 billion in digital assets.

Among the interviewees, 6 of them expect to substantially increase their exposure in crypto assets between now and 2023, while 11 said they will also add to their exposure.

“Despite the recent correction in the crypto market, our survey confirms there is an ever-increasing appetite for this asset class among professional investors, willing to take constructive longer-term view on this asset class,” Anatoly Crachilov, CEO and Founding Partner of Nickel Digital, commented.

From the study, the main reasons driving greater allocation to digital assets result to be the structural long-term capital appreciation prospects of crypto assets (cited by 16 of the 23 UK-based professional investors), increased confidence following investors’ exposure to crypto assets, and the improved regulatory environment (both of the latter mentioned by 9 interviewees).

However, the survey also identified hurdles to investing into crypto assets. Some of the professional investors interviewed cited concerns about the relative size of the crypto asset market and its liquidity as an issue, as well as lack of transparency and volatility in the market.  Concerns over custodial services for crypto assets were also identified as a knot in terms of investing in the asset class.

Commenting on this, Fiona King, Head of Institutional Sales at Nickel, said: “We are looking to address many of the concerns investors might have, not least the high volatility of crypto market. To that end, the recent performance of our market-neutral arbitrage fund demonstrated its ability to protect capital, as well as to deliver consistent and repeatable returns during turbulent times, such as April and May 2021.”

Nickel was founded by senior traders and investment professionals formerly from major financial institutions including Goldman Sachs and JPMorgan, and its clients include institutional investors, global wealth managers and ultra-high net worth individuals from around the world.

The company’s funds have delivered strong performance despite recent crypto market corrections. “Security of clients’ assets is paramount at Nickel. We deploy independent institutional-grade custody models in partnership with US-based Fidelity and UK-based Copper using a range of sophisticated cryptographic solutions, including distributed private keys and MPC (multi-party computation) vaults,” explained Henry Howell, Nickel’s Head of Business Development. “The approach is based on air-gapped, multi-signature, cross-organisation setup, thus mitigating a “single point of failure”, typically associated with self-custody of crypto assets. In our setup, the join control over fund assets is retained by independent fund administrator and fund custodian at all times.”

Nickel’s flagship Digital Asset Arbitrage Fund posting record returns in April and May, the months of intense selloff in the Bitcoin market. The fund was up +4.1% in April and +2.6% in May, in the face of Bitcoin dropping more than 40% from April’s highs, taking H1 2021 performance to +12.6%