A few years ago, only technology-driven retail investors were interested in cryptocurrencies, in particular Bitcoin (BTC) which has maintained its dominance over the other digital assets. In the recent past, despite ups and downs, BTC has continued to hold its ground, making it a credible alternative investment for many investors. Not only more private investors have improved their knowledge and gained interest in crypto-assets, but also banks, asset managers, and institutional investors as well have started to join the party.
There is a broader recognition of digital assets as a legitimate asset class and the ecosystem is slowly maturing. With a small allocation in digital assets within a traditional portfolio, institutional investors are adding diversification to their investment.
The credibility of Bitcoin is validated by many indicators, such as:
- Regulators: Recently the Office of the Comptroller of the Currency (OCC) permitted banks to run nodes on public blockchain networks to streamline payment functions like processing, validation, and settlement (1/4/21)
- Banks: JP Morgan added major cryptocurrency exchanges Coinbase and Gemini as banking clients (5/12/2020)
- Institutional investors: Fidelity Digital to hold bitcoin as collateral for cash loans (12/9/20)
- Public companies: PayPal announced cryptocurrency buying and selling services (10/20/2020), Tesla has invested $1.5bn in BTC as part of its treasury management strategy and Microstrategy has also more than $700m in BTC as part of its treasury management.
Altcoins are gaining interest
BTC market dominance is still high (62% as of 11th of February) but, in the past few weeks, Ethereum and other Altcoins have catched up as bitcoin investors start to diversify their holdings into other cryptocurrencies. Altcoin refers to any digital assets other than BTC, with different purposes and built on different protocols. Institutions are slowly starting to trade other big market capitalisations such as ETH, LTC and the DeFi (Decentralised Finance) wave will push them toward new bluechips altcoins, such as Aave and UniSwap... The market structure has seen further improvements in terms of capacity and liquidity. With a high number of Altcoins and some of them having a small market cap, a selection is not always easy unless having a strong conviction or only considering top contenders, with a robust ecosystem.
Total Market Capitalisation Dominance (%)
Source: TradingView 11/02/21
Institutional investors don’t want to miss out the opportunity to participate in the alternative investment market and diversify their portfolio but don’t want either to be left overexposed to one digital asset with extreme risk. Crypto assets are a risky investment due to volatility, with prices prone to frequent and extreme movements.
An alternative option is to invest into crypto vehicles structured by professionals, aiming to diversify traditional multi-asset portfolios (60/40) and enhance their risk profiles.
Trakx provides such solutions via crypto-traded indices
Trakx offers secured exposure to bitcoin and other leading cryptocurrencies (Altcoins), via its crypto-traded indices: CTIs. These products invest in digital assets and have similar characteristics as ETFs (Exchange Traded Fund) in traditional finance. CTIs track underlying digital asset indices including the most liquid (daily/monthly volumes) and largest market capitalisation crypto-assets. CTIs give investors the opportunity to partake in this growing asset class and get immediate exposure to bitcoin (BTC) and Altcoins.
Trakx has launched various such digital index products following different thematics and risk profiles.
Please contact Laurent at Trakx for additional questions.
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