Crypto Assets Reach Wealth Management

Interest is high, but the volatility and complexity of crypto assets still deter many investors. Karl im Brahm, Head of Avaloq Germany, explains that this is an opportunity for wealth managers to expand their client relationships through appropriate management and advisory services.


The context is crucial in assessing the potential of crypto assets. Blockchain technology enables not only crypto currencies, but also tokenisation: the generation of digital tokens representing different types of assets. Until now, tokenization was mainly enabled by Ethereum and used for many Initial Coin Offerings (ICOs) beyond Bitcoin.


Although the hype about Bitcoin and ICOs has subsided, the underlying technology is still valid. It opens up the potential to support a whole range of different types of digital assets through tokens. Even regulatory authorities such as the Bafin now speak of a paradigm shift and regard the digital token as a sui generis security class.


The industry also believes in the future of technology. A study by Greenwich Associates last year shows that 70 percent of respondents either believe that some crypto assets will continue to thrive after an initial market shakeout, or that a regulatory framework will emerge that provides the basis for further growth and innovation. For several reasons, crypto-assets can also be worthwhile for serious investors: Crypto assets act as anti-inflationary value stores, opening up growth potential and offering diversification effects.


Its use as a store of value is a key feature of money. However, inflation is the scourge of their currency, especially in emerging markets. Accordingly, the population is looking for alternatives to store its saved values. While, for example, the Argentine peso fell by more than 50 percent against the USD in 2018, the volume of bitcoins bought with Argentine pesos doubled over the same period.


Crypto assets are also traded speculatively. Due to the fall in prices after the 2017 rally, many investors thought that crypto assets were prematurely dead. However, the trading volumes of crypto-assets already prove that there is still a lot of interest. In fact, many analysts see the bursting of the crypto bubble as a sign of the growing maturity of digital assets and not as a sign of their imminent disappearance.