Cryptocurrencies are a much-debated topic and answer to the question — whether they would emerge as a viable investment option or not — depends on who you ask.
There are several famous supporters of digital currencies, whereas there are a number of sceptics at the same time.
The recently-released report by Boston Consulting Group, Global Wealth 2022: Standing Still Is Not an Option — meanwhile — projects that the crypto market cap could grow four to five times bigger before the decade comes to an end.
The report also states that investors who are 35 years old and younger are nearly 1.5-2 times more likely than the individuals over 45 years to own digital assets.
Projected growth
Crypto assets reached a market cap of more than $2 trillion at the end of 2021, which is even larger than the Canada’s GDP, according to a report by Boston Consulting Group.
The report further states that this value could grow four to give times bigger before the decade ends regardless of the bearish sentiment.
Until recently, most wealth managers observed this market from the side lines.
“Digital coins and their derivatives can be a risky business, as the May 2022 collapse of a leading algorithmic stablecoin demonstrated. Regulatory scrutiny is also likely to escalate, and the technologies that underpin the crypto market are extremely complex,” states the report.
Despite these challenges, crypto offerings and the learning curve around them have matured in recent years, and we expect that progress to continue.
“Forward looking hedge funds and family offices have improved their Sharpe ratios through measured allocations to crypto assets. And with newer products such as nonfungible tokens (NFTs) generating mass interest and mind-boggling sums, there’s no denying the appeal for wealth clients and WMs alike,” the report further states.
Non-fungible tokens
Although digital currencies have been the predominant crypto investment vehicle that account for 90 percent of all assets in the space, but new products are proliferating and their value and appeal are growing.
In 2021, the weekly trade volume of art and gaming NFTs surpassed $150 million. Blockchain-based decentralized finance (DeFi) offerings are also gaining interest. “These products emulate the function of traditional financial institutions and for transactions ranging from lending to deposits. As of May 2022, DeFi has attracted more than $120 billion in assets,” states the report.
Popularity on a rise
The non-conventional wealth managers currently manage as much as $0.8 trillion to $1.0 trillion in crypto-related wealth. That’s a significant amount of value up for grabs, representing roughly 2 percent to 3 percent of total wealth AUM as of 2021.
Besides, cryptocurrencies have the potential to deliver higher revenue margins. “In 2021, the crypto-native platform BlockFi earned three to five times as much revenue per dollar in AUM as a typical private bank did,” states the report.
Furthermore, investors are ready to engage. Nearly 80 percent of those BCG surveyed in April 2022 said that they would consider raising their crypto holdings if wealth managers offered advisory services.