The next innovation in crypto won’t come from the introduction of the Solana exchange-traded fund, as the asset manager says it is more focused on other ways investors can diversify their portfolios with cryptocurrencies.
Long-awaited Bitcoin While January’s ETF was a success, many are wondering what’s next for the industry. Some crypto enthusiasts are speculating as to which coin will be included in the ETF next. Many are speculating that it could be Solana, but asset managers at the Wyoming Blockchain Symposium in Jackson Hole say the search doesn’t stop there.
“When we think about how to educate investors about this broader ecosystem, it’s not about individual tokens, but rather how do we think about building portfolios and from there, how do we create exposure that represents different sectors within this growing ecosystem,” said Cynthia Lo-Bessette, head of digital asset management at Fidelity Investments. “We have an opportunity to provide added value beyond individual access to some of the largest crypto tokens.”
Actively Managed Products
Steve Kurtz, global head of asset management at Galaxy, noted the firm recently partnered with asset management giant State Street to develop active trading products.
“This isn’t about the next coin, this is about the fact that there are now 75 securities linked to cryptocurrencies, futures, options, crypto ETFs, all kinds of exchange traded funds around the world,” he said. “Accordion has expanded so much in just a year that it can start to develop an aggressive strategy.”
“I don’t think the average crypto manager would say this, but this is a path to bring awareness and education to crypto through a different toolset,” he added.
Outside the U.S., investors can, for example, buy the CoinShares Physical Staked Solana ETP. The ETF, which tracks spot bitcoin prices, was available in Canada in 2021, long before it was approved in the U.S.
Diversifying the portfolio
For some asset managers, diversifying their crypto investments rather than just focusing on a single-currency product may be key. There are currently 11 Bitcoin ETFs available in the U.S., but aside from fee structures, they all look roughly the same to most investors.
“If we look at the profitability of the asset management business from a platform perspective, over the next three to four years, [alternative] “Hedge funds, liquidity token funds, venture funds, these are all models that are being tested,” Kurtz said.
Savvy bitcoin investors and money managers generally recommend a small allocation of 1% to 5% to add risk to a portfolio without too much exposure to the cryptocurrency’s notorious volatility.
But as a range of crypto-related securities hit the market, it could be an opportunity for asset managers to reset the bar and raise client expectations.
“People are talking about active management and the differentiation is not about fees or total cost of ownership but about what strategy you put in place and what alpha you generate. And then it’s time to see that it’s actually achieved something in terms of becoming an asset class,” Kurtz said.
“There is no real asset management industry in crypto, and it was a small industry until the emergence of Bitcoin ETFs,” he added.
