Demand and adoption of cryptocurrencies has been growing, especially among institutional investors; and Blockchain technology is already changing how consumers and companies conduct business online. Over 10 years since the arrival of Bitcoin and with access to crypto steadily improving, this exciting new asset class may have a place within future investment portfolios for certain investors (although it may not be an appropriate or prudent diversifier for all investors).
At WisdomTree, we see many parallels between the crypto space and other previously hard to access asset classes. In Europe, we launched the world's first physically backed gold Exchange Traded Product, or ETP, making it simpler and more cost effective to invest in secure physical gold. And we believe that, like precious metals and other commodities, investors would benefit from cryptocurrencies being available in an ETP wrapper.
Exchange traded products are transparent, publicly traded instruments. Over $8 trillion are held in ETPs globally . A robust ETP structure for cryptocurrency could simplify access for mainstream investors and provide a familiar experience in a regulated environment.
This addresses the first concern of investors when it comes to the crypto space; security. While there are many solutions out there for safeguarding cryptocurrencies, implementing them can be a steep learning curve and a costly operational exercise. Investing in cryptocurrencies through an ETP allows investors to hand over the expensive and time-consuming burden of managing keys, wallets, or service providers.
Another important aspect is transparency. By accessing a website from the issuer, investors can monitor exactly how many coins are represented by the outstanding ETP shares. This added transparency helps enable ETPs to potentially trade at the value of the underlying assets, which helps in reducing risk of dramatic and prolonged premiums and discounts.