Noting that the increasing trend of traditional asset managers towards digital assets is gaining momentum, Huobi Global CFO Lily Zhang evaluated the effect of fund companies’ increased interest in crypto assets on investors.
Notable recent examples include Abrdn, which bought a stake in Archax, a UK-regulated digital exchange; BlackRock, which owns institutional Bitcoin lending and a technology platform affiliated with Coinbase, Charles Schwab, who launched a crypto ETF (Exchange Traded Fund), and Schroders, which bought digital asset manager Forteus in July.
These developments not only reflect the growing acceptance of cryptocurrencies in the wealth management industry, but also encourage those who prefer to invest with established and trusted names, as they broaden their retail investor base by introducing digital assets. The timing of these moves, many of which took place after the crypto market slumped in May, also demonstrates companies’ confidence in digital assets despite weak investor sentiment.
Why are asset managers turning to crypto?
Some of the enthusiasm can be attributed to FOMO (fear of missing out), as the Financial Times noted in an article. Arguing that asset managers should be open to multiple finance futures, the publication said that cryptocurrencies can help sophisticated investors protect their portfolios, similar to other alternative assets such as wine or gold.
While it is unclear for now whether cryptocurrencies will be able to regain their lost value after the market crash, history has shown that parts of the markets continue to improve even after the bubbles burst. As asset managers, at the beginning of the curve, improve their skills and know-how on blockchain technology, they can be better prepared for the launch of central bank digital currencies.
Indeed, the FT provides a strong rationale for traditional fund companies to transition to digital assets: “It is perfectly possible to embrace the technology, entrepreneurial spirit and innovation of crypto while staying an arm’s length away from the asset class itself.”
What does it offer for casual investors?
What does this mean, especially for casual investors who avoid buying cryptocurrencies because of price volatility concerns? Such individuals may make their first investment in cryptocurrencies; may choose to do so through traditional asset managers, given their reputation, status and track record. If doing so gives such investors more confidence, it could help them take baby steps towards making cryptocurrencies an important part of their portfolios.
Such investors are not expected to switch to digital exchanges like Huobi Global after the experience and knowledge gained from crypto investments. This scenario becomes more plausible as regulations increase in the digital asset industry and players like Huobi Global continue to grow harmoniously around the world. As more crypto platform users enjoy being protected by regulations and industry compliance, these digital assets will further narrow the gap to traditional investments and accelerate growth.
While it is not yet known whether the initial crypto influx by asset managers will gain momentum, this trend should be welcomed by both the digital asset industry and investors. The rise in traditional fund companies offering crypto offerings could mean greater investor protection and education. In an increasingly volatile and uncertain world, that can only be a good thing when it comes to growing your savings.
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