As per stash.com’s revelation on cryptocurrency statistics in 2023, approximately 13% of over 320 million crypto owners across the globe are American, a figure in proximity to the United States’ population size itself. Courtesy of Alex Botte and Max Williams from Runa Digital Assets, deeper insights surrounding investments have surfaced. Given the growing variety of digital asset investment avenues, the analysis of client investment patterns and motivations is imperative.
An increasing inclination towards seeking advisor support for managing crypto and digital asset investments can be discerned among investors. Thus, for financial advisors planning to extend guidance and tax planning supports, it becomes crucial to familiarize themselves with the panorama of their client’s options.
Typically, a client planning crypto exposure could start independently with a retail account on cryptocurrency exchanges, say, Coinbase or Gemini. Nonetheless, professional assistance could still be desired for aspects such as token selection, trading, custody, and asset allocation. To cater to these nuances, let’s unravel the potential passive investment options currently available in the market.
Prominent examples include investing in stocks of publicly traded companies containing digital asset exposure, businesses like Coinbase with digital assets on their balance sheets, or Blockchain-themed ETFs providing diversified exposure to crypto space stocks. A passive option also exists in the form of liquid tokens, which clients can independently access via Coinbase or Gemini exchanges. Indirect exposure through liquid token funds, separately managed accounts (SMAs), or exchange-traded investment products could be another feasible strategy.
The allure of these options lies in the convenience offered by the familiar investment wrappers and the possibility of maintaining these digital assets in brokerage accounts akin to other non-crypto assets.
While digital asset markets represent considerable investment prospects, a dichotomy exists between passive buyers leaning towards a “HODL” approach and active managers aiming for diligent outperformance. Crypto leadership and valuation dynamics are pretty volatile, where professional active managers often gain an upper hand by identifying the tokens harbouring the potential for long-term appreciation.
However, options like liquid token funds and venture capital on early-stage investment require higher investment minimums and specific investor qualifications and might not be everyone’s cup of tea. The liquid token funds offer diversified exposure and can participate in on-chain activities like yield farming. On the other end of the spectrum, Venture funds make equity and token investments into nascent companies and protocols.
Despite its nascent phase, crypto as an asset class is expanding rapidly. As far as the passive investment is concerned, the market offers an increasing number of products. Meanwhile, on the active side, traditional strategies like market neutral, fundamental investing are being applied to digital asset markets. This expanding menu of investment options provides a substantial range of choices that advisors can present to their clients.
Source: Coindesk
