The current rally in crypto market saw Bitcoin gaining over 77 percent just in October. Other top digital assets rolling along Bitcoin include Ethereum, Cardano, Solana, Dogecoin, and Polkadot. Market watchers think the ongoing bull run could be attributed to the current inflation as a result of pandemic outbreaks and lockdown. Excess liquidity in the market makes private investors and family offices seek deflationary like Bitcoin and other crypto assets.
Private Investors Look Towards Bitcoin And Other Crypto Investments
A recent survey by Goldman Sachs revealed 15 percent of family offices around the globe, and 25 percent in America have invested in cryptocurrencies. Another 45 percent are considering investing in the future. According to Goldman Sachs, Private investors consider digital assets as a way to mitigate higher inflation rates and other microeconomics options. About 42 percent are thinking of digital assets to protect their investment portfolio from devaluation.
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Experts think inflation, triggered by pandemic-related supply chain disruptions, will leave an impact on the world economy for months. In the US, consumer prices rose to 5.2 percent in August, over 2020 and 2021. In September, inflation rose to 3.3 percent in nations that use the Euro, recording the biggest gain since 2009.
High inflation rates left family offices a large pool of funds to invest and long-term options. More private investors are looking towards digital assets. Cryptocurrencies can store value and provide diversification in portfolios. This makes many private wealth managers develop more interest in cryptocurrencies and similar investment options like NFTs.
What Are Family Offices?
A family office is a private wealth management advisory firm that serves high-net-worth individuals. They direct and oversee decisions on the financial matters of a family. Family offices are different from traditional wealth management firms, they provide outsourced solutions to manage the finance and investment of highly wealthy individuals. They serve as partners in working to sustain a family’s assets, families rely on them to foster a sense of unity and love.
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Other Factors Stirring Interest in Crypto Investment
According to Diogo Monica, co-founder, and president of the crypto bank Anchorage Digital, low-interest rates are major draws to cryptocurrency. She said low-interest rates are major mitigation to investment risks that could be envisaged in crypto. The environment pushes investors to seek alternatives beyond treasury bills, everyone that was in venture capital is now forced into crypto. Many believe cryptocurrency can provide growth in an inflationary environment.
Silicon-Valley Style Companies And Startups Expose Family Private Investors to Cryptocurrency
Monica said the Silicon Valley companies expose family offices to crypto through tokens, offering crypto tokens to them instead of returning equity and dividend to investors, pushing them to deal with digital currencies. She cited an example with Protocol labs that have been paying investors with its token, Filecoin.
Even when private wealth managers have not developed any interest in cryptocurrency, they get exposure through startups they are investing in. Monica said some families can cope with crypto volatility but are concerned about regulatory risks associated with cryptocurrency.
Other family offices are concerned about cybersecurity attacks in the crypto space. The majority of them would want to invest in exchanges that can offer protection for their crypto wallets.
The crypto market will experience more bull runs if there is clarity about crypto regulations and other bottlenecks. Private wealth managers would be more open to investing if there is a clear path in understanding the risks, protection, and other regulations associated with the crypto asset class.