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More than 9 out of 10 (92%) agree digital assets have an important role to play in portfolios but most prefer the investment level in digital assets to be moderate.

Its study with institutional investors and wealth managers in the US, UK, Germany, Switzerland, Singapore, Brazil and the United Arab Emirates who collectively manage around $3.5 trillion in assets, found 66% believe digital assets role should be moderate in a diversified portfolio.

Just 32% believe they can play a significant role while 39% believe they should play a small role in portfolios. Around 42% believe crypto and digital assets should only be included for a specific investment angle while just 7% say they should not be included.

Nickel's study found that the growing consensus on using digital assets for diversification is backed by growing optimism about fund launches in the sector. Around 62% questioned expect a recovery digital asset focused fund launches over the next 12 months compared with last year. Almost all (96%), however, believe the backing of a major financial institution is important before they invest with 57% saying it is very important.

Along with fund launches, institutional investors are forecasting growth in the use of tokenisation of investment funds and asset classes. Around 85% predict growth in tokenisation over the next three years with 25% expecting dramatic growth.

However, volatility remains the biggest barrier to investing in the crypto and digital assets sector for institutional investors who are sceptical. More than half (51%) who are reluctant to invest cite worries about volatility while 45% have concerns about security and 40% worry they don't understand the sector. Just a third (34%) are concerned about regulation.

Anatoly Crachilov, CEO and Founding Partner at Nickel Digital said: "Institutional investors and wealth managers are gradually discovering the diversification benefits offered by digital assets in portfolio construction." "There are a range of views of course on what sort of role digital assets should play with most focusing on a moderate role which tallies with most expert views on how digital assets can support performance."