JPMorgan Survey Finds Institutional Traders Favor AI Over Crypto

The landscape of institutional trading is undergoing a transformation, with artificial intelligence (AI) at the forefront.

by Faruk Imamovic
JPMorgan Survey Finds Institutional Traders Favor AI Over Crypto
© Getty Images/Leon Neal

The landscape of institutional trading is undergoing a transformation, with artificial intelligence (AI) at the forefront. A recent survey by JPMorgan, one of the world's leading investment banks, reveals a significant pivot among institutional traders towards AI and machine learning (ML) as pivotal technologies shaping the future of trading.

This article delves into the findings of this comprehensive survey, exploring the evolving attitudes of traders towards technology and the declining interest in once-promising tools such as blockchain.

The Rise of AI in Institutional Trading

At the heart of trading's technological revolution is AI, a tool that now dominates the strategic plans of institutional investors.

JPMorgan's "e-Trading Edit: Insights from the Inside" survey paints a clear picture: 61% of the 4,010 institutional traders across 65 countries see AI and ML not just as emerging technologies but as the main drivers of trading in the next three years.

This marks a substantial leap from two years prior when AI was deemed important by only a quarter of respondents. Behind AI and ML, application programming interface (API) integration holds a distant second place, with 13% of traders acknowledging its influence on trading's future.

Other technologies like blockchain or distributed ledger technology and quantum computing garnered 7% of respondents' votes. Meanwhile, mobile trading applications and natural language processing are on the radar of 6% of those surveyed.

The Shifting Sands of Technology in Trading

Despite the rise of AI, there's a notable shift in sentiment towards other technologies. Blockchain and mobile trading applications, once at the forefront of innovation, have seen a marked decrease in interest among institutional traders.

Since 2022, these technologies have witnessed a decrease of 18% and 23% in investor preferences, respectively. This change underscores a broader trend of evolving priorities and perhaps a realignment of the perceived value of these technologies in the face of AI's ascent.

The allure of AI in trading is multifaceted. Features such as predictive analytics for trade outcomes and real-time market sentiment analysis are not just futuristic concepts but are being actively integrated into trading strategies today.

A report from Nvidia in 2022 highlighted that 30% of investors utilizing AI and ML managed to cut their annual revenue losses by more than 10% — a testament to AI's growing impact on financial results.

AI Trading© Getty Images/Joe Raedle

Institutional Reluctance Towards Cryptocurrency Trading

The JPMorgan survey unveils a cautious stance towards the cryptocurrency market among institutional traders.

The data is telling: a striking 78% have no intentions of engaging with cryptocurrency or digital coins in the upcoming five years. This sentiment has intensified since last year when 72% expressed a lack of interest in crypto trading.

These numbers not only reflect a hesitation but also signal a potential reevaluation of digital assets' place in the broader financial market. Intriguingly, despite the overarching reluctance, there's a subtle yet noticeable uptick in the number of traders active in the crypto space, rising from 8% in 2023 to 9% in 2024.

This marginal growth might hint at a complex relationship between traditional financial institutions and the volatile yet innovative realm of cryptocurrencies.

JPMorgan's Controversial Stance on Crypto

JPMorgan's own journey through the cryptocurrency landscape has been fraught with contradictions.

The survey's findings on the decreasing interest in crypto trading come against a backdrop of mixed messages from the company's leadership. Jamie Dimon, the CEO, has been a vocal critic of cryptocurrencies like Bitcoin, even as JPMorgan itself took a significant step by becoming an authorized participant in one of BlackRock's spot Bitcoin exchange-traded funds — one of the fastest-growing in the market.

Jamie Dimon© Getty Images/Win McNamee

This duality reflects a broader skepticism and caution that permeates the institutional approach to cryptocurrencies. While the potential and capabilities of blockchain, the underlying technology of cryptocurrencies, are recognized, the financial industry appears to be grappling with the unpredictable nature of digital coins and the regulatory uncertainties that come with them.

The Outlook of Trading Technologies

It's evident that AI and ML are not just buzzwords but are becoming integral components of trading strategy and operations. The data from JPMorgan's survey suggests that traders are increasingly looking to these technologies to provide a competitive edge and to navigate the complexities of the global financial markets with greater precision and insight.

The decline in enthusiasm for mobile trading applications could indicate a maturation of this technology, where it has become a standard rather than a standout feature. Meanwhile, the cautious approach to blockchain and cryptocurrency could signal a wait-and-see attitude, as institutions watch for regulatory clarifications and market stabilization.

The financial sector's technological landscape is in constant flux, with AI firmly at the helm of innovation. It will be interesting to watch how these trends evolve and whether AI will continue to hold its position as the cornerstone of trading technology, or if emerging technologies will disrupt the status quo once again.

Looking Ahead

In the dynamic world of trading, the only constant is change. AI's ascendancy in the sector is a clear indicator of where the focus of future development lies. The growing disinterest in cryptocurrencies and blockchain could either be a temporary response to market volatility or a long-term realignment of investment strategies.

The insights from surveys like JPMorgan's become invaluable. They not only reflect current sentiments but also help shape the strategic direction of the industry. The evolving technological landscape of trading is sure to keep market participants on their toes, as they adapt to the new tools and possibilities that define the cutting edge of finance.