17 August 2022
2 min read
Crypto Wealth Management
In crypto wealth management, there are more than one sub asset-classes to invest in - Digital Currencies, DeFi Coins, Tokens, NFTs, etc. Managing multiple assets on-chain is not only a challenge with the new entrants but also with the seasoned crypto investors. With the rise of crypto structured products and assets, wealth management is also becoming increasingly necessary. It is not very much different from traditional wealth management. However, with the advent of Web3, the crypto wealth management space is being disrupted in many ways. One of which is DeFi or Decentralised Finance. Besides, autonomous wealth management protocols are trying to remove the need. But before we delve deeper, it is important to understand how it works.
Crypto wealth managers
The investment market for cryptos never sleeps. There appears to be a need to constantly track your portfolio and be mindful and observant of the insights to prevent losses. Traditionally, investors park aside a certain amount for investment and trust their wealth managers to choose the best investment plans/vehicles for them. Asset managers are also emerging in this space to support crypto wealth management. Interestingly, a lot of traditional wealth management firms are also entering the space and tying up with existing blockchain projects. Investment in crypto is increasingly becoming a part of the overall portfolio of an investor. Another aspect of upcoming crypto wealth management is risk mitigation through derivatives. Crypto wealth managers are coming up with structured products of interesting combinations of several underlying crypto assets.
Volatility and risk hedging
Market volatility is inherent to all investments and so is crypto. Often confused as the downward risk only, volatility is also about the upward swing and potential gains. In order to minimise the downward risk, Crypto wealth management firms are always on the go to create safer and balanced investment plans. The saying, “do not put all your eggs in one basket” applies to crypto investments as well. Besides volatility, there might be other kinds of risks involved like, transactional risks and the lack of regulation in the crypto market. Crypto wealth management involves strategising ways to minimise these risks in the market. Liquidity management, diversification of sub-asset class and insights based investment plans become evidently necessary.
Globally the crypto wealth management industry is expected to grow at a 25% CAGR. Currently the market size is more than 600 million USD. And if we compare this number to the number of retail investors putting aside their wealth in a crypto based portfolio, one can see we are simply scratching on the top. Institutional investors are also entering this space by striking partnerships.
Web3 is knocking around the corner and there is a rise in autonomous, decentralised crypto wealth management platforms which help you track your portfolio across public blockchain networks. Some provide you with deep insights from the market to make an informed investment. DeFi is eliminating the need for an intermediary to manage and grow your crypto wealth. It is not so far when crypto wealth management will be a common thing like traditional investment and wealth management. There will be several projects providing best crypto management services to retail investors.
1: What is wealth management ? Ans: Wealth management is an investment advisory service that helps investor manage their wealth by investing into balanced portfolio.
2: What is DeFi ? Ans: DeFi stands for Decentralized Finance. This is an emerging space where investment and financial activities can be done without involving any central authority or intermediary.
3: What are Asset Management Protocols ? Ans: Blockchain projects that help manage crypto assets. Check https://www.aarna.finance/