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As younger generation drives crypto interest, ETFs may be an option

For family offices and high-net-worth investors, fund managers can offer a diversified, potentially lower-risk entry point to cryptocurrency

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With new generations interested in steering family offices into cryptocurrency, some enterprising family wealth managers are assessing the potential gains balanced with the volatility of this market and the lack of intrinsic value of the asset.

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There is an alternative to diving in directly and buying a currency, however.

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Cryptocurrency exchange-traded funds – a grouping of individual securities that track an underlying index – can give investors exposure to the market, but in a more diverse, potentially less risky, and simpler way than buying and selling individual digital assets.

And cryptocurrency investment fund managers have various products designed for high-net-worth and family office investors.

In 2021, Canada became the first country in the world to offer a crypto-asset ETF and since then eight issuers have launched a total of 34 ETFs, according to the National Bank of Canada.

”ETFs enjoyed 11 consecutive months of inflows in 2021,” according to the Bank. “Despite characteristic volatility that could only be described as “stomach churning,” crypto asset ETFs grew from zero to $5.9 billion in assets across more than 30 different products in under a year.”

While the volatility in crypto is just something investors need to prepare themselves for it can be a safer choice, from the cybersecurity perspective, to buy a crypto ETF, explains Skye Collyer, vice-president, Brand Development, Horizons ETFs, which has three crypto-related ETFs listed on the TSX.

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“The advantage of holding an ETF for your exposure versus buying the actual Bitcoin or any other currency coin under the crypto universe, is that you don’t have to buy it directly through a digital wallet or cold storage, or manage a separate cryptocurrency account, with separate passwords and its exposure to cyber hackers,” she explains.

But there is still a need for crypto ETF investors to be able to “stomach the massive swings” that can be seen in crypto (which can be 30 per cent plus), so assessing if this is for you is important, says Collyer.

“The audience for crypto is someone with a longer timeframe for their investment horizon…those that have a higher risk tolerance and the ability to invest in it without putting the majority of their wealth in it.”

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