According to a survey conducted by GlobalData last year, high net worth (HNW) investors have a preference for direct investment in cryptocurrencies.
While investing in cryptocurrencies directly poses a higher risk for investors, researchers at the consulting and data analysis firm GlobalData highlighted in their “Global wealth managers survey” report that High net worth investors around the world are increasingly attracted to direct investment in cryptocurrencies compared to exposure to certain cryptoassets offered by investment vehicles such as exchange-traded funds or ETFs.
Apparently it is the possibility of obtaining greater profits or rewards which motivates many high net worth (HNW) investors to go straight into the cryptocurrency market, despite the existing risks.
Sergel Woldemichael, Senior Wealth Management Analyst at GlobalData, notes that lHigh net worth investors are aware of the risk involved in direct investment in cryptoassets, such as the possibility of forgetting your private keys or falling victim to a hack or phishing attack.
Still, direct investment in cryptocurrencies trumps exchange-traded funds, which offer a safer way to invest in some crypto assets, Woldemichael noted.
Source: Global Data
The chart above shows the percentage of high net worth investors in different countries and regions of the world who prefer to invest directly in the cryptocurrency market and not through ETFs, as well as the percentage of HNW investors who are aware of the risks of owning crypto assets.
“The potential for higher returns is what attracts investors to the crypto asset class. As it only takes up a small proportion of their portfolio, they are happy to take on the maximum risk,” GlobalData.
There are more than 22.000 cryptocurrencies in circulation on the market, according to data from the CoinMarketCap platform, so high-net-worth investors have no shortage of options to enter this market.
However, GlobalData researchers note that at present, the dominance of cryptocurrencies in the portfolios and investment portfolios of HNW investors remains low, although the demand for crypto assets is expected to grow in the future and these digital assets will occupy a more considerable part of investors' portfolios.
Source: CoinMarketCap
The growing demand for cryptocurrencies globally and the entry of more major players in the financial and wealth management sector such as Fidelity and Charles Schwab into the crypto world has prompted several fund managers to list cryptocurrencies in their portfolios of services.
According to GlobalData, although many managers are still hesitant about cryptocurrencies, for those who want to maintain their client portfolio and hold on to as much wealth as possible, “it is essential to offer both a direct route to cryptocurrency investment and a fund option,” the consulting and analysis firm concluded.
For his part, in the face of the ProShares Bitcoin ETF to launch in October, several experts told Business Insider about the pros and cons of investing in crypto assets through exchange-traded funds.
Among the advantages of ETFs, experts highlighted greater security and convenience for investors by not having to own or manage crypto assets directly. Disadvantages included the difference in prices of crypto assets between a fund and the spot market, the complexity they represent for many retail investors, and trading costs.
Naeem Aslam, Chief Market Analyst at AvaTrade, He compared investing in cryptocurrencies through ETFs to having second-hand exposure“Investors are not going to be able to enjoy the real taste of Bitcoin, the real momentum or the volatility that we have,” Aslam told the financial outlet.
Continue reading: BlackRock Adds Bitcoin to Its $15.000 Billion Global Allocation Fund
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