Why invest in crypto assets?

Financial investments with Bitcoin have been the talk of the town once more since the approval of Bitcoin ETFs. Many investors are now asking themselves whether they should invest in cryptocurrencies. The approval of Bitcoin ETFs appears to have definitively legitimised crypto investments and thus also digital assets. Bitcoin ETFs are currently marching from one record to the next.

Record inflows of USD 1.045 billion were registered on 12 March, with BlackRock alone purchasing USD 849 million worth of Bitcoin for its clients on this day. The world’s largest asset manager now holds more than 200,000 Bitcoin units. The Bitcoin ETF of Fidelity, another major US investment firm, also already holds in excess of 120,000 Bitcoin units. The growth in the holdings of the ETF providers has been so rapid as they have purchased an average of over USD 260 billion worth of Bitcoin since the launch of Bitcoin ETFs on 11 January. 

• The establishment of crypto assets as a new asset class is progressing inexorably. Confidence in this still young asset class is also growing steadily. The fact that these financial giants are now recommending to their clients that they include Bitcoin in their portfolios should be interpreted as the ultimate seal of approval.
• Blockchain is a technology that offers great potential. In addition to the creation of new digital assets, blockchain technology also allows for the tokenisation of real assets. For BlackRock CEO Larry Fink, this is the real objective. For example, tokenisation makes it possible to issue rights to real goods as digital tokens on blockchain technology, making previously illiquid real assets easily tradeable. Blockchain also promises various other possible areas of application outside the world of finance, including in combination with artificial intelligence and in the field of digital identity.
• Blockchain is creating a new “Internet of value and sovereignty”. For the first time, assets and data can be exchanged directly between users (as part of so-called peer-to-peer transactions) without having to rely on centralised intermediaries. This is making Internet-owned digital money possible, in other words money that belongs to the “entire” Internet community. Digital micropayments completed in a matter of seconds at low cost are the result. 
• As digital gold, Bitcoin currently finds itself in the acceptance phase. Positive future scenarios may include additional regulatory clarity, further recognition by countries and potentially even central bank participation.
• Crypto assets differ from equities, bonds, currencies and commodities and, in some cases, have different performance drivers, such as halving. Bitcoin is also becoming the primary indicator of financial liquidity. The more liquidity that central banks, governments or commercial banks add to globally intact debt monetisation, the more Bitcoin responds in terms of its price.
• Crypto assets offer diversification effects thanks to a low level of correlation to other asset classes. The sometimes moderate degree of correlation to other asset classes means that the inclusion of digital assets can reduce the portfolio risk. This means that the overall level of risk does not increase in proportion to the crypto position. Diversification by means of crypto assets helps to reduce the risk for investors. 
• A portfolio supplemented with crypto assets also stands out thanks to its favourable risk-return ratio. Thanks to the marked volatility of these financial investments, a palpable positive performance effect can be achieved even with the addition of a small share of digital assets (1% to 3%).

The arguments in favour of digital assets have never seemed so convincing. Ever more institutional investors are being left with no choice but to recognise this. After all, Bitcoin is the best-performing asset of the past decade, making it increasingly difficult for financial advisors to ignore it. 

How to invest?

But how should you now go about investing in digital assets? Are Bitcoin ETFs an effective vehicle? As they are based in the US, they can only be bought in Europe on US exchanges. In Europe, however, similar Bitcoin ETFs will not emerge as quickly as they have done on the other side of the pond. 

There is a simple reason for this: Bitcoin ETFs are characterised by the fact that they are exclusively based on a single asset, i.e. Bitcoin. This means that the performance of a Bitcoin ETF is solely dependent on the price of Bitcoin. Under European regulation, ETFs have to reflect a diversified selection of assets, as is the case with the DAX and SMI ETFs. A Bitcoin ETF therefore does not comply with financial law.

Maerki Baumann offers an alternative. The “Crypto” focus module allows clients to participate in the development of digital assets. The module is actively managed and the portfolio is monitored on a continuous basis, meaning that market changes are responded to in a timely manner. The crypto assets are held for clients in their own segregated wallets.

An investment is possible from an amount of CHF 100,000. For investors wishing to invest a smaller amount, the Crypto Certificate is available. Here, an investment is possible from a minimum volume of just CHF 10,000. The Crypto Certificate is fully aligned with the “Crypto” focus module in terms of its design.

Important legal information:
 

This publication is intended for information and marketing purposes only, and does not constitute investment advice or a specific individual investment recommendation. It is not a sales prospectus and does not constitute a request, an offer, or a recommendation to buy or sell investment instruments or investment services, or to engage in any other transaction. Maerki Baumann & Co. AG does not provide legal or tax advice. Investors are therefore advised to obtain independent legal or tax advice concerning the suitability of such investments, since their tax treatment depends on the personal circumstances of the investor in question and is subject to change at any time. ­Maerki Baumann & Co. AG holds a Swiss banking licence issued by the Financial Market Supervisory Authority (FINMA).

This publication is expressly not intended for persons resident in Germany.

Editorial deadline: April 2024

Maerki Baumann & Co. AG
Dreikönigstrasse 6, CH-8002 Zurich
T +41 44 286 25 25, info@maerki-baumann.ch
www.maerki-baumann.ch