Larger financial institutions such as Fidelity and Charles Schwab (NYSE: SCHW) are gradually waking up to the concept of cryptocurrencies. As a direct result of this, these institutions are gradually offering cryptocurrency exchange-traded funds (ETFs).
According to the most recent numbers from the global wealth managers’ survey conducted by GlobalData and released on October 13, high-net-worth individuals (also known as HNW investors) continue to have an interest in investing directly in the asset class.
The Senior Wealth Management Analyst at GlobalData, Sergel Woldemichael, said that: “Because of cryptocurrency’s high level of volatility, the results of the 2022 Global Wealth Managers Survey indicated that the average portfolio of high-net-worth individuals throughout the world held only 1.4% in crypto assets. Even though it is anticipated that demand will increase in the next years, investors are hesitant to allow cryptocurrencies to constitute a significant portion of their portfolio.
Currently, there are around 21,000 different cryptocurrencies available on the market; as a result, investors have a vast selection of assets from which to pick. The risk associated with direct investments is on par with that of other types of securities while being significantly higher (and thus the most reward).
As a result of this, companies that are already well-established as well as those that are in the process of establishing themselves are now providing consumer security in the form of cryptocurrency funds or ETFs such as Bitcoin ETFs. ETFs also give an extra degree of safety for investors, reducing the likelihood that their accounts will be hacked or that they would lose their assets because they forgot their passwords. Investors can purchase ETFs through a broker or through an exchange-traded fund (ETF).
Woldemichael added:
“Players that are just concentrating on cryptocurrency exchange-traded funds (ETFs) are missing out on a big portion of high-net-worth cryptocurrency investors who want to invest directly. The possibility of higher returns is what attracts investors to the asset class; because it only accounts for a small fraction of their portfolio, they are content to incur the highest amount of risk.
The demand from customers has forced the hands of large companies, despite the fact that some financial managers continue to have doubts about bitcoin and its potential future applications. According to Woldemichael, it is essential for companies that want to keep as much of their customers’ capital as possible to offer both a direct path into investing in cryptocurrencies and an option to invest via a fund. This is because direct investment in cryptocurrencies is riskier than an indirect investment through funds.