Digital Asset Outlook 2022
1.7
Theme 1. Digital Asset Economy
Approaches for gaining exposure to digital assets
With the increasing popularity of digital assets, investors can gain direct exposure by buying and holding digital assets or indirectly through equities and funds. The following table (Figure 12) illustrates the available digital asset investment options. Figure 12. Common approaches for gaining exposure to digital assets Approach
Details
Advantages
Disadvantages
Future trend
Examples
Convenient
Security risk; Relatively high transaction fees; Non-competitive trade execution; Unclear compliance status.
Brokerage apps and websites are increasingly popular among retail investors
Coinbase, Kraken
Online or crypto brokerage
Enables users to trade digital assets similar to buying or selling stocks through brokers
Allows investors to invest in digital assets through funds
Managed exposure to digital assets; Funds provide onestop services, including custody, trading, reporting, tax, audit etc.
Limited availability (only to accredited investors)
Private funds are increasingly popular with HNWI; registered and hedge funds
Pantera Bitcoin Fund (launched in 2013)
Allows investors to gain exposure to equities that are levered to the digital assets opportunity.
Simple and straightforward
Other factors influence stocks valuations, including fund flows
Increasingly popular with retail and professional investors.
Coinbase, BC Group, Huobi Tech, Riot Blockchain
Trades digital assets with a custodian
A low-cost way to gain exposure while eliminating intermediaries (fund providers).
Not available to smaller investors;
Increasingly popular with buy-side, venture capital funds, family offices etc.
Hex Trust
Allows investors to access through future
Fully regulated; Allows individuals to use margin.
Complex costs and tax calculations
Increasingly popular with hedge funds and proprietary trading firms.
CME bitcoin futures market
Way to get exposure to digital asset startups
Accessing the top tier of venture capital funds can be difficult; Significant fees; Lack of liquidity.
Increasingly popular with endowments, pensions, and family offices.
Blockchain Capital
Venture Capital Funds
Allows investors to invest in the equity of cryptoasset startups.
Promising approach
ETF
Packages cryptocurrencies inside an ETF or mutual fund
The variance of premiums and discounts to their NAV.
More asset managers are filing for cryptocurrency ETF with regulators
Exchange-traded products have been approved in certain jurisdictions (e.g. US, Switzerland, Germany, and Sweden)
Passive and active private placement funds
Publicly traded shares
Direct custodial relationship
Regulated futures markets
Costly due diligence process.
Source: CFA Cryptoassets report
62