Wealthy see crypto winter as perfect time to buy

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(Kitco News) –  The ongoing carnage in the cryptocurrency market has been a major turn-off for retail investors, leading many to exit the market and declare they are done with cryptos for good. But recent data shows that some of the wealthiest investors see this as the perfect time to gain exposure to the digital asset class.

According to the results of a survey conducted by Coalition Greenwich, US Financial Advisors (FAs) are “fielding significantly increased demand from investors for digital assets despite the current crypto winter.”

The survey – which was conducted in conjunction with Talos, a leading provider of institutional digital asset trading technology – found that 92% of “mass affluent and high net worth (HNW) clients” are now inquiring about gaining access to digital assets in their portfolios.

A total of 30% of the FAs surveyed indicated that they already have or plan to recommend specific digital asset investment products to their clients within the next three months.

“Overall, demand continues to grow with over half the advisors surveyed suggesting that client interest is increasing or staying the same as a year ago, with 35% saying interest has increased significantly over last year,” the press release said.

The survey was conducted during Q3 of 2022 and included responses from 537 U.S.-based FAs who serve mass affluent, high net worth, or a hybrid combination of these client segments. Bank/wirehouse, insurance, independent and institutional firms were included in the study.

“Financial Advisors believe that the growth trend for digital asset adoption as an emerging asset class will persist and continue to increase, even in the face of the current bear market and recent market events,” said the report’s author David Easthope, Senior Analyst of Market Structure and Technology at Coalition Greenwich. “While the market will continue to evolve, the results of our survey suggest that the long-term demand trend remains intact among this fairly conservative segment of the market.”

Compliance approval of digital asset investment products was identified by 69% of FAs as the most important feature for any digital asset platform. Compliance was seen as significantly more important than research, execution quality and data/analytics in terms of critical platform features.

“In fact, 64% of advisors who said they had not yet created an investment strategy for clients primarily due to compliance restrictions making it difficult or even impossible,” Easthope said.

The report also revealed that advisors see the ease of use and integration as a priority, with 68% citing the importance of a single system for managing digital assets alongside other client assets.

“As digital assets go increasingly mainstream, financial advisors and other service providers need access to reliable, compliant, end-to-end trading systems,” said Talos CEO and co-founder Anton Katz. “While institutional investors have assumed a heightened sense of caution following the collapse of FTX, we believe demand for solutions that enable FAs and others to develop and evolve their digital asset offerings will continue to increase in the long-term based on this report.”

Exchange-traded funds (ETFs) were the preferred crypto investment vehicles of FAs, with 64% saying they have or will recommend an ETF related to digital assets.

According to the report, “the available options for ETFs are expanding and there appears to be pent up demand for these products. Also getting attention are other fund structures like OTC trusts and other investment funds. Simply put, ETFs are a must have, likely due to their simplicity and regulated status.”