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What is holding back tradfi investors from crypto?

Traditional asset managers' lack of cryptocurrency education represents a significant missed opportunity.

Photo by Viktor Forgacs / Unsplash

Due to the persistent fallacy that blockchains have no inherent value, traditional portfolio managers have refrained from investing in cryptocurrencies. These asset managers own stakes in companies like Amazon and Facebook (1), which haven't made a profit in years. When Facebook was still a young company, it didn't appear to have an inherent value.

Although not all blockchains are revenue-generating assets, including Ethereum (2), which has an intrinsic value, it is conceivable that there is a network value here where the network is expanding. The asset's value accrues from how people are utilizing the product. Although it seems unfathomable, there remains a reluctance to accept cryptocurrency, with the absence of regulation cited as the cause.

Regulations cannot be one of them because they are constantly a source of worry, yet Jamie Coutts (3) asserts that BTC is controlled because there is no regulatory risk. The cryptocurrency was controlled the minute it was recognized as a taxable item, requiring users to report to the tax authorities in their respective countries.

According to Coutts, this may be due to a fear of the unknown because asset managers who ignore or choose not to educate themselves about cryptocurrencies are missing out on an opportunity for those who are hesitant to invest in them and are instead focused on potential benefits rather than market volatility.

Understanding the world dynamics, including debasement and technological advancement, which crypto is at the junction of, gives crypto the wind in its sails as an asset class that should be considered for some allocation. In light of the recent market unrest, Swiss wealth management firm Picket Group (4) warned against investing in cryptocurrencies.

However, some do not believe that private bankers and private bank portfolios have a place in the crypto asset class. Meanwhile, other supporters claim that institutional investors are still interested in crypto-related investments despite the current market conditions.

Several major Australian banks have shown interest in digital assets, with ANZ and NAB (5) choosing to focus on stablecoins and traditional asset tokenization rather than crypto investments. Despite institutional interest being slow to pick up steam, many are waiting on the sidelines to time the market.