In Focus: Passive Investing  

How crypto went from nothing to $3trn in a decade

Benjamin Dean

Benjamin Dean

The digital assets (sometimes termed ‘cryptocurrency’ or just ‘crypto’) ecosystem has come from nothing to almost $3trn (£2.23trn) in value within a decade.

This open-source technology raced across the world at unprecedented speed.

Despite this rapid growth, the investment profession industry has been slow to engage with this new technology as well as the opportunities and risks that it poses. 

Seeking to understand how this shift has impacted the investment professional industry, WisdomTree recently commissioned a survey, conducted by CoreData Research, and polled 600 professional investors across Europe ranging from wholesale financial advisory firms to wealth managers and family offices.

The investors surveyed are responsible for approximately €400bn (£3.41bn) in assets under management. 

The results from this survey are worth dwelling on – and point to an under-served segment of the market. More than eight in 10 (83 per cent) of European advisers have spoken to their clients about investing in cryptocurrencies/digital assets.

Yet almost a third of clients (32 per cent) intend to step outside of their adviser relationship to allocate to the asset class. If one were to wind the clock back even five years, these results would have been very different. 

As an industry, digital assets can no longer be thought of as ‘nascent’. Last week saw the thirteenth anniversary of the release of the Bitcoin White Paper, which set the stage for this decade of technological change and evolution.

The speed at which this open-source software spread across the world was unprecedented – and due in large part to the saturation point that internet access (particularly via ‘smart’ phones) has reached.

This comes in a context where the digital asset ecosystem has marked a high-water mark, spurred on by Securities and Exchange Commission approval of Bitcoin futures exchange-traded funds in the United States, with almost $3trn equivalent in market capitalisation (for example, the price of coins/tokens multiplied by market price).

A critical mass has been reached that cannot be ignored. In just the past two months the US Department of the Treasury has released an official report on ‘stablecoins’ (digital tokens that correspond 1-to-1 with a US dollar) and the People’s Bank of China has called such transactions ‘illegal’.

El Salvador has ‘bitcoinised’ and now has Bitcoin along the US dollar as legal tender. Large corporates have also spotted these opportunities and are making big moves to capture them.

Facebook, one of the world’s largest and most influential companies, has rebranded to Meta, a reference to the virtual ‘metaverse’ that digital assets will be a part of.

With it becoming increasingly apparent that digital assets are here to stay, the investment professional industry must play catch-up. The good news is that there is more quality information now available to get up to speed with this wave of technological change – and the opportunities it presents.

For instance, WisdomTree’s Crypto Insights Hub covers a broad range of 101 articles and explainers, videos as well as insights from our digital assets team.