Apart from its role in revolutionizing communication, the internet was the driving force in bringing investing online, breaking down informational and execution barriers for a large class of retail traders. The subsequent spread of trading applications brought immense functionality to a wider range of investors, namely the ability to participate in financial markets with greater execution speed and reduced fees.
Since then, platforms like eTrade and Interactive Brokers have popularized trading even further, making a wide range of asset classes, tools, and education accessible to vast numbers of retail traders. Even better, these platforms centralize many functions and provide liquidity from multiple exchanges and ECNs, adding to the advantages of online investing.
The next phase of evolution is already meeting significant milestones after UK-based robo-advisor and online wealth manager Nutmeg surpassed GBP 1 billion in funds under management last year. However, this degree of centralized execution and advice is less the case for crypto trading, which faces multiple challenges that make it unappealing to less-knowledgeable investors.
With a clear need present, crypto asset management tools are quickly emerging to assist retail investors with their exploration of the market. For the companies behind these platforms, the incentive is clear: the market capitalization of cryptocurrencies is nearly $400 billion, and it’s starting to show signs of stabilizing.
A more mature market also means that less knowledgeable investors are likely to dip their toes in, requiring in tandem a platform that delivers easier access compared to the fragmentation that currently defines the trading ecosystem.
The Appeal of Simplified Crypto Management
The process of purchasing cryptocurrencies is still harder than buying regular equities. As cryptocurrencies attract new users, more market participants are becoming aware of the need for straightforward tools designed to manage crypto portfolios for traders of all skill levels.
At present, new traders must first find a wallet that accepts the cryptocurrencies they wish to trade, then find an exchange that lists their preferred coin before completing a multifaceted and lengthy verification process. Once they’ve entered the market, they must spread out across wallets and exchanges if they wish to diversify their holdings. While it’s doable, the process’s complexity remains a big barrier to entry for many would-be traders. Many in the industry recognize the problem. Alon Muroch, CEO of Blox, notes that “keeping track and managing your crypto assets is no walk in the park, even, or especially for the more experienced traders. Knowing where your coins are kept, how they performed and what their real-time status is, can be a challenge.”
As a result, some companies are introducing a tool that is now commonplace in more traditional financial markets—asset management. Instead of having to manage multiple accounts and wallets, crypto asset management platforms are simplifying the process by helping users consolidate their diverse holdings while simultaneously providing improved portfolio management tools.
There are already several funds that offer crypto asset management and invest on behalf of customers. So far, this model has shown strong results, with one company—Bitwise Asset Management—reporting a 51% return in less than 4 months after conceiving a crypto-specific fund. With the soaring popularity of the asset class, institutional investors have taken note, with research suggesting that the number of crypto investment funds could double in 2018.
Even so, most traders in the ecosystem still manage their own investments, and there are several platforms that have established themselves as go-to tools, with new ones emerging every day.
Sorting Through an Emerging Market
Thus far, the crypto sector has seen numerous exchanges emerge, all offering some combination of cryptocurrencies though not a comprehensive list. This poses a challenge for investors, as many exchanges are not compatible with all wallets, leading to complications when managing a diverse array of assets.
To resolve the issue, crypto asset management platforms seek to simplify the process without resorting to a third party or manager to handle users’ investments. For everyday traders who lack a deep and thorough understanding of the field, these tools offer an easier pathway to entry and success.
There are several platforms that promise to streamline asset management for crypto traders, and many that have already demonstrated their efficacy. For example, Muroch's Blox offers users an easy approach to centralize their multiple wallet and exchange accounts in a single location.
The company’s tools help users manage multiple portfolios concurrently and support automatic syncing so users’ trades and purchases will always be updated centrally. Furthermore, the platform incentivizes greater use with tokenization. Traders can use CDT tokens to unlock premium features and can earn coins by employing the company’s portfolio tracking tools.
Others provide more traditional asset management tools such as Iconomi, which allows traders to create their own asset groups and combinations to match their risk appetite. Blackmoon, another blockchain-based platform, hosts a blockchain-based service that orchestrates tools for asset managers to administer client investments, as well as retail traders to oversee their own funds. Some companies have even developed a more democratic approach, enabling traders to invest in other participants’ portfolios and strategies, like Melonport.
A New, Simple Horizon
Ultimately, cryptocurrency optimism and embrace will only be sustained if new entrants in the market are able to easily participate. Crypto asset management tools offer traders of all skill levels a simple and more centralized location to manage their investments, and thus a clearer pathway to entering the ecosystem.
As these platforms become more mainstream and continue to defragment the increasingly segmented crypto exchange environment, the burgeoning asset class will continue to experience improved growth. Even so, their success depends not only on delivering a single location to track investments but as a hub to understand the entire market better.
The next frontier for asset management tools may be consolidation as platforms discover their limitations and locate partners that can enhance their value proposition. By building and promoting these highly synergistic platforms, the cryptocurrency market will finally open itself to much broader participation from the entire online investing community.