The latest World Wealth Report 2017 released by Capgemini, a multi-billion dollar French professional services company, revealed that 29%, nearly one in three, high net-worth individuals are interested in holding cryptocurrency in the long-term.
Why Investors are Interested in Cryptocurrency
In 2017, primarily due to the strong performance of the US stock market, Capgemini head of financial services Anirban Bose stated that high net-worth investors saw a return of around 20% for the second year in a row. The US, Japan, Germany, and China have housed and created more millionaires than all of the other countries in the world combined, and the four countries are currently responsible for 61% of the world’s high net-worth investors.
Intriguingly, possibly because of these large returns over the past two years, the World Wealth Report disclosed that one in three high net worth investors are considering investing in major cryptocurrencies like Bitcoin and Ethereum as long-term investments, and another 27% of investors show interested in the cryptocurrency market.
The report read:
“Enthusiasm for digital currency is growing. 29% of HNWIs say they have a high degree of interest in holding cryptocurrencies and another 27% were somewhat interested.”
When the global financial market performs well, investors tend to be more aggressive with their investments and take more risks, engaging in high risk and high return investments. The cryptocurrency market, as $87 billion investment bank Goldman Sachs CEO Lloyd Blankfein noted this week, is an emerging market that can no longer be dismissed given its robust infrastructure and a large amount of capital from retail investors that has already been injected to the market.
At the Economic Club of New York conference, Blankfein also noted that there exists a possibility that Bitcoin or another cryptocurrency could become a natural progression from fiat or paper money to digital money, and emphasized that the possibility of digital assets replacing traditional currencies cannot be ruled out. Blankfein went as far as to say that critics that simply dismiss cryptocurrency are arrogant.
“If you go through that fiat currency where they say this is worth what it’s worth because I, the government, says it is, why couldn’t you have a consensus currency?” said Blankfein.
What’s Stopping Investors
High net worth individuals and large-scale investors can invest through cryptocurrency exchanges like Coinbase and Gemini with minimal verification and straightforward Know Your Customer (KYC) approval.
But, for high net worth individuals to commit millions of dollars to the cryptocurrency market, trusted custodian solutions are necessary. Coinbase, the world’s largest cryptocurrency exchange, wallet platform, and brokerage recently revealed Coinbase Custody, a custodianship high net worth individuals and institutional investors can utilize to invest in the market.
Kyle Samani, a co-founder and managing partner at cryptocurrency hedge fund Multicoin Capital, said that custodianship has often been the last barrier for many investors and the emergence of cryptocurrency custodian solutions will likely lead to an influx of large-scale retail and institutional investors entering the cryptocurrency market.
“There are many investors where custody is the last barrier. Over the next year, the market will realize that safekeeping is a solved problem. This will release a large capital wave,” Samani explained.
Without a doubt, given the low volume and the strong downward trend of major cryptocurrencies, the cryptocurrency market is in a bear market and an accumulation period. But, the demand from retail investors is continuing to increase, creating a strong foundation for the market to rebound on top of in the next mid-term rally.
Cover Photo by Joris Berthelot on Unsplash