High-net-worth investors prefer direct crypto investments over cryptocurrency ETFs, data shows

Larger financial institutions like Fidelity and Charles Schwab (NYSE: SCHW) are gradually warming around to cryptocurrencies, and as a result, they are steadily introducing crypto exchange-traded funds (ETFs). 

However, high-net-worth investors (HNW investors) continue to be interested in investing directly straight into the asset class, according to the latest statistics of the global wealth managers survey from GlobalData published on October 13.

Sergel Woldemichael, the Senior Wealth Management Analyst at GlobalData, commented:

“Cryptocurrency is highly volatile, so unsurprisingly, GlobalData’s 2022 Global Wealth Managers Survey found that the average global HNW portfolio holds just 1.4% in crypto. While demand is expected to grow going forward, investors are also unwilling to let cryptocurrency take up a sizable chunk of their portfolio.”

There are roughly 21,000 different cryptocurrencies now in the market; thus, investors have a wide variety of assets to choose from. Direct investment has the highest level of risk, comparable to that of other securities (and thus the most reward). 

Crypto ETFs provide an additional degree of protection

In light of this, both established and up-and-coming businesses are now offering customers protection in the form of cryptocurrency funds or ETFs like Bitcoin ETFs. ETFs also provide an additional degree of protection for investors, making it less likely that their accounts would be hacked or that they will lose their funds because they forgot their passwords.

Woldemichael added: 

“Players focusing solely on crypto ETFs are missing out on the significant chunk of HNW crypto investors who prefer to go direct. <..> The potential of heightened returns is what pulls investors to the asset class; as it only takes up a small proportion of their portfolio, they are happy to take maximum risk.”

Even while there are still money managers who are skeptical about bitcoin and its future, consumer demand has pushed the hands of major firms. Woldemichael notes that it is crucial for businesses that want to keep as much of their clients’ capital as possible to provide both a direct path into investing in cryptocurrencies and an option to invest via a fund.

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