Lily Zhang
CFO of Huobi Group
As I noted in my earlier post about growing institutional interest in digital assets, the trend towards traditional asset managers moving into digital assets is on the rise.
Some recent examples include Abrdn, which purchased a share in Archax which is a UK-regulated digital exchange; BlackRock, which has an institutional Bitcoin trust and a technology platform linked with Coinbase; Charles Schwab, which launched a cryptocurrency ETF and Schroders, which bought into digital assets manager Forteus on July.
These are positive developments as they reflect an increasing acceptance of cryptocurrency in the asset management sector. They also broaden the retail investor base by introducing digital investments to those who prefer to place their money with trusted and established names.
These moves were made after the May crypto market crash, which speaks volumes about the confidence of the companies in digital assets, despite the weakening investor sentiments.
Why are asset managers turning to crypto?
The Financial Times highlighted FOMO (fear of missing out) as a reason for some of the enthusiasm in an editorial. The publication argued that asset managers must be open to multiple futures and that cryptocurrency could help hedge portfolios similar to wine or gold.
Although it’s not clear if cryptocurrencies will be able to regain their lost value following the market crash, history has shown that certain markets can still thrive after bubbles burst. These asset managers can be ahead of the curve and better prepare for the central bank’s digital currencies’ launch by being able to build their knowledge and capabilities in blockchain technology.
The FT supports traditional fund houses moving into digital assets. “(It is) perfectly possible to embrace technology, entrepreneurial spirit, and innovation of cryptocurrency while remaining at arm’s length from it.”
What’s the deal for ordinary investors
What does this mean to ordinary investors, particularly those who have resisted buying cryptocurrencies because of concerns about their volatility?
These individuals might prefer to invest in cryptocurrency through traditional asset managers due to their reputation, regulatory status, and track record. This can give these investors more confidence and help them make cryptocurrencies a part of their portfolio.
Also, it is possible that these investors will, once they have accumulated experience and knowledge through their crypto investments, move on to digital platforms such as Huobi Global. This scenario is made more possible by increasing regulation in the digital asset industry and players like Huobi Global pursuing compliant global growth.
If more users of crypto platforms have access to industry compliance and regulations, it will reduce the gap between digital assets and traditional investments. This will accelerate the growth and decrease the risk for the latter.
Although it is still unclear if the initial crypto forays of asset managers will gain traction or not, investors and the digital assets industry should welcome this trend. The increase in crypto-focused traditional fund houses can provide greater investor education and protection. This is a great thing when it comes to growing your wealth in an ever-changing and uncertain world.
Photo by Mark Higham @theartshot360 at Unsplash
Disclaimer
This communication was prepared for educational or informational purposes only. It is subject to revision. This communication should not serve as the basis of an investment decision. It should not be construed to be a recommendation to enter into any transaction. This communication does not constitute a recommendation for any particular person and is not intended to be a recommendation. This communication contains information that is believed to be reliable but not guaranteed to be complete and accurate. Huobi Global does not take responsibility for information derived from other sources or statistical services. All opinions and estimates contained herein are based on the current situation as of the date of publication. They can be changed at any time without notice.
