Once viewed as speculative ventures, cryptocurrencies are now trending towards mainstream acceptance. In Europe, a prominent global financial services company is leading this movement. They offer a variety of exchange-traded products (ETPs) that facilitate diversification and simplify the buying and selling of crypto assets.
Here, Dovile Silenskyte, the Director of Digital Assets Research at the firm, shares insights on the evolution of cryptocurrency as a legitimate asset class, current adoption trends, and the company’s latest ETP linked to the CoinDesk 20 index.
How do you perceive cryptocurrency becoming more similar to conventional asset classes?
Similar to any asset category, diversification is crucial. Investors typically spread their risk across different equity and bond positions, and this principle applies to cryptocurrency investments as well. Focusing solely on bitcoin is like holding just one stock within an equity portfolio, which isn’t an efficient strategy for maximizing risk-adjusted returns. A diversified approach, incorporating multiple digital assets, can better capture the overall growth potential of the sector.
As the digital asset category matures, there’s a pressing need for benchmarks that enable performance assessment, investment, and trading. The CoinDesk 20 index acts as the crypto industry’s benchmark and stands as the most traded index in the world — akin to the S&P 500 for the crypto realm. By employing a broad and diversified strategy through the CoinDesk 20, investors can effectively tap into various opportunities in the digital asset market.
For those lacking extensive crypto knowledge, broad-based crypto indices provide a simplified pathway to market exposure without the intricacies of selecting individual tokens. Just as ETF investors achieve equity gains without individual stock picking, a diversified crypto index allows passive engagement in the expansion of digital assets.
What adoption trends have you observed historically? Are there any geographical distinctions you’ve noted?
Having been in existence for over 15 years, enduring multiple boom-and-bust cycles, and gaining traction among more than half a billion users, cryptocurrencies have established themselves as a significant asset class rather than a fleeting trend. Both bitcoin and ether have found their way into institutional portfolios.
Despite the long-term growth prospects of cryptocurrencies, a portion of investors remains hesitant. With a market capitalization hovering around $3 trillion, the ecosystem and its applications are continuously growing. The crypto market is now comparable in size, if not larger, to traditional institutional investments like high-yield bonds, inflation-linked bonds, and small caps in emerging markets.
The adoption of crypto is not uniform; it varies by region influenced by regulatory environments, institutional frameworks, and economic demands. Europe is at the forefront, having enabled investors to access bitcoin ETPs for over five years, along with a variety of specific coin and diversified crypto basket ETPs.
How is the company facilitating this next growth phase beyond bitcoin?
The firm has been providing crypto access through ETPs since 2019. Since then, they have expanded their offerings to include ETPs that cover five additional individual coins as well as four diversified basket products, including the newly launched ETP linked to the CoinDesk 20 index. These crypto ETPs leverage institutional-level storage solutions to ensure high security, and some even provide staking yields. By incorporating staking into a crypto ETP, investors can engage with the networks’ growth while participating in their governance and security.
Can you elaborate on the recently launched Physical CoinDesk 20 ETP?
This strategy is designed to help investors navigate the complexities of choosing individual assets by offering secure and diversified exposure to roughly 90% of the crypto market by capitalization, fostering the next wave of innovation. The strategy creates a highly diversified entry point into the crypto ecosystem, making it more accessible to a historically challenging segment of the market. Additionally, it aims to provide staking yields.
Where can someone find more information?
European investors can discover additional details about the firm’s range of physically-backed crypto ETPs here.
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