With the first month of 2023 drawing to a close, cryptocurrency-focused equity exchange-traded funds (ETFs) have made incredible gains for more institutional-focused investors. Optimistic cryptocurrency conditions and high-performing ETFs are also sparking high-net-worth (HNW) individuals to explore assets such as Bitcoin.
Wealth management advisory firm deVere showed that despite the rocky previous 12 months, millionaires seek advice on adding assets like Bitcoin to their portfolios. deVere conducted a survey that showed that as much as 82 percent of HNW individuals have been asking for advice on crypto.
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While January’s performance has been positive across most of the crypto market, it must be remembered that there is still a long way to go to reach the previously seen highs. However, macroeconomic changes are pointing towards conditions conducive to ‘risk-on’ assets, which many institutional investors consider crypto to fall under.
Crypto-ETFs Offer Over 100% Gains in January
Leading the way for institutional investors who have gone down the crypto-focused ETFs route is the $3.9 million Valkyrie Bitcoin Miners ETF, with a 101 percent return since January 1. However, it is not an outlier, with several other funds showing between 40 and 80 percent gains.
The crypto market has also rallied, with Bitcoin growing nearly 40 percent since the end of last year. The major coin hit $23,000, having sunk nearer to $16,000 towards the end of 2022. It must be remembered this is still far off its all-time high in November 2021.
Other coins have also shown decent returns, with Solana jumping nearly 150% in the same period.
Those with a more traditional and institutional investing background are looking toward macroeconomic conditions for the answers. There are signs, particularly in the US, that inflation might have peaked, paving the way for more ‘risk-on’ investment strategies.
Millionaires Look to Buy Bitcoin
A deeper dive into deVere’s survey shows that eight of ten clients with between $1.23 million and $6.15 million of investable assets sought advice on cryptocurrencies through 2022.
Nigel Green, the CEO and founder of deVere Group, noted how last year: “The crypto market delivered its worst performance since 2018, with Bitcoin, the headline-grabbing market leader, falling about 75% during the year.”
“The price drops came as investors reduced their exposure to risk-on assets, including stocks and crypto, due to heightened concerns about inflation and slower economic growth. Yet against this backdrop of the so-called ‘crypto winter,’ HNWs were consistently seeking advice from their financial advisers about including digital currencies into their portfolios.”
The positive start to 2023 and instances of significant returns for general investors and institutional ETF users will no doubt fuel more interest in HNW individuals. Furthermore, Wall Street giants and other institutional investor-serving firms have also started offering more crypto-related services.
On the Flipside
- The returns from crypto-focused ETFs will be positive for those invested in them, but the long-term performance will still be predicated on the crypto market’s recovery. Crypto is notoriously volatile, and while there have been price rises in January, that does not necessitate a bullish trend that will sustain crypto-focused ETF growth.
Why You Should Care
The recovery of ETFs and general institutional interest is propelled by a general crypto market recovery. But additional risk-on investment from institutions can have a significant impact on what is still a relatively small market. The run-up to the all-time high of Bitcoin in November 2021 snowballed greatly on the injection of institutional investment.
