Investing platforms cash in on crypto craze

Investing platforms cash in on crypto craze
Companies ranging from established robo-advisers like Betterment to upstarts like the crypto-focused robo Domain Money have launched new products in recent weeks to help clients navigate the complex and often confusing world of digital assets.
FEB 18, 2022

Even after the recent Bitcoin crash that cut the value of the digital asset in half earlier this year, retail investors and advisers are still flocking toward the explosive world of crypto. 

According to InvestmentNews Research, about a third of all advisers expect to increase their clients’ exposure to digital assets in the coming year. While only 10% of advisers were using cryptocurrencies last year, 44% believed they would be managing it within five years.

Fintech startups are looking to cash in on that demand. Companies ranging from established robo-advisers like Betterment to upstarts like the crypto-focused robo Domain Money have inked deals and launched new products in recent weeks to help clients navigate the complex, and often confusing world, of digital assets.

There are more than 10,000 cryptocurrencies in existence as of February, according to an analysis by CoinMarketCap, and while many of them have little to no trading volume, some are backed by dedicated investing communities.

“The cryptoverse is incredibly opaque, and you end up going down a rabbit hole pretty quickly,” said Michael Weisz, founder of the alternative investment platform Yieldstreet. “Clients are begging us for crypto exposure.”

Yieldstreet’s latest launch invests directly in pre-ICO tokens to cash in on early success of some of the lesser known coins. Through a partnership with Pantera Capital, a hedge fund that specializes in cryptocurrencies, the Early Stage Token Fund I has previously invested in cryptocurrencies like Polkadot, Amp and Aurora.

“Most people don't have time or expertise to get involved, but they see the wealth creation that's happening and want a trusted way to invest,” Weisz said.

Fintech companies like Yieldstreet are now using automation to combine numerous investors into a single fund, bringing down the minimum for everyone and allowing entry to funds that used to be the domain of the ultrarich. 

The investment minimum for the Early Stage Token Fund I is $25,000, and the fund is only open to accredited investors.

The recent launch of Domain Money, a new actively managed digital platform created by Adam Dell, the former head of product at Marcus by Goldman Sachs, is another example of fintech companies providing new avenues for investors to wade into the often murky world of crypto. 

“For investors that are less familiar with the crypto asset class, these strategies provide investors a thoughtful way to get access to a rapidly growing market, as well as the future of finance,” Dell said in an email. 

The company’s website shows strong performance, with its core all-stock offering returning 22.8% over a 12-month period beginning in November 2020, albeit during a period when the S&P 500 returned 27.9%. 

Not to be outdone, New York-based robo-adviser Betterment also made a splash in the crypto universe earlier this month with the announcement that it was acquiring cryptocurrency manager Makara Inc. in a deal that marks the company’s first major foray into digital assets. According to a spokesperson, in the next six months Betterment will roll out its own crypto tool using the Makara technology, and Makara will be renamed.

While the Betterment move followed the larger retail trend into crypto, one analyst wondered whether the launch will ultimately be better or worse for existing clients.

“New CEO Sarah Levy is changing Betterment,” fintech consultant Bill Winterberg said on Twitter after the announcement. “The question is, is it for the better or for worse?”

Even with the sudden downturn in digital assets that shook advisers’ confidence in crypto in the beginning of the year, the demand for new products has not subsided. In fact, interest has increased, Weisz said. 

“A blip in the market, if you're long-term bullish, then that's the ultimate time to get in,” he said. “If you're reactionary or emotional, then there's a much different reaction.” 

Yieldstreet plans to launch additional offerings with exposure every quarter to continue to diversify its portfolios, alongside more traditional alternative assets, including art equity funds and venture capital

Having launched its first cryptocurrency fund in the U.S. in 2013, Pantera now manages more than $5.6 billion of assets under management as of the beginning of the year, and the Early Stage fund has generated a lifetime return of over 1,400% through December 2021, according to data provided by the company.

“You want to be invested along the entire continuum of crypto and what supports that ecosystem,” Weisz said. “And, you want to be invested long term.” 

Latest News

Edward Jones facing more race bias claims in new lawsuit
Edward Jones facing more race bias claims in new lawsuit

A private partnership, Edward Jones is a giant in the retail brokerage industry with more than 20,000 financial advisors.

Advisor moves: LPL recruitment momentum continues with $815M Northwestern Mutual team
Advisor moves: LPL recruitment momentum continues with $815M Northwestern Mutual team

Meanwhile, Raymond James and Tritonpoint Partners separately welcomed father-son teams, including a breakaway from UBS in Missouri.

SEC chief Atkins signals caution on prediction market ETFs amid broader rethink of novel fund structures
SEC chief Atkins signals caution on prediction market ETFs amid broader rethink of novel fund structures

Paul Atkins has asked staff to solicit public comment on novel ETFs, pausing the clock on as many as 24 filings linked to the booming event contracts market.

Private capital's $1 trillion bet on the American retirement account
Private capital's $1 trillion bet on the American retirement account

From 401(k)s to retail funds, Deloitte sees private equity and credit crossing into mainstream investing on two fronts at once.

Advisor moves: Wells Fargo Advisors pulls in $9.6b in fresh talent during first half of May
Advisor moves: Wells Fargo Advisors pulls in $9.6b in fresh talent during first half of May

Big-name defections from Morgan Stanley, UBS, and Merrill Lynch headline a busy two weeks of recruiting for the wirehouse.

SPONSORED Are hedge funds the missing ingredient?

Wellington explores how multi strategy hedge funds may enhance diversification

SPONSORED Beyond wealth management: Why the future of advice is becoming more human

As technical expertise becomes increasingly commoditized, advisors who can integrate strategy, relationships, and specialized expertise into a cohesive client experience will define the next era of wealth management