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Sky news Australia uploaded a video stating investors can expect a ‘crypto boom’ soon, i.e. a new bull run, ‘whether they like it or not’. Mark Carnegie, Co-Founding Partner of M.H. Carnegie & Co., asserts the inevitability of cryptocurrencies’ rise, regardless of personal preferences coming whether you like it or not.
Following the tumultuous events in the cryptocurrency market last year, a remarkable resurgence has been witnessed in the prices of major digital assets. Bitcoin surged by 21%, while Ethereum climbed by 6% against the U.S. dollar. The bullish trend sparks discussions on cryptocurrency’s future potential as a viable investment class.
With growing interest and institutional support, the call for managed investment schemes to provide exposure to these digital assets, even for retail investors, has grown louder. In this article, we explore the potential benefits, challenges, and regulatory considerations surrounding such investment schemes.
The Legitimacy of cryptocurrencies as an asset class and creation of managed investment schemes
With the launch of Bitcoin Exchange-Traded Funds (ETFs) by prominent financial institutions like BlackRock and Fidelity, cryptocurrencies are experiencing increasing acceptance and legitimization as an investment asset class. This institutional involvement is considered a positive indicator of the industry’s growth and credibility.
Consequently, a belief in the future potential of cryptocurrencies has emerged, prompting the need for managed investment schemes to cater to a diverse range of investors. Sophisticated investor-managed funds have been operational for some time, serving the needs of high-net-worth individuals and institutional investors.
Recently, regulatory authorities have granted certain conditions that enable such funds to open up to retail investors. These conditions generally include meeting regulatory capital requirements, ensuring insurance coverage, and adhering to enhanced disclosure norms.
These provisions aim to protect retail investors from potential risks associated with the still-nascent and volatile market.
Addressing risks in the cryptocurrency market and dealing with liquidity concerns
The cryptocurrency market is not without risks. Although it has undergone a maturation process that eliminated several bad actors, frauds, and hacks, it remains a market susceptible to vulnerabilities. This highlights the importance of implementing robust security measures and custody solutions.
Even experienced investors have faced unforeseen challenges, underscoring the need for prudence and vigilance. Liquidity is a critical factor in managing investment schemes involving cryptocurrencies. Caution is crucial in selecting exchanges and assets for the fund due to cryptocurrency market volatility and currency-freezing incidents.
M.H. Carnegie & Co Founding Partner Mark Carnegie says the prevalence and popularity of cryptocurrencies and digital assets are “coming whether you like it or not”.https://t.co/Ie9XQPQms1
— Sky News Australia (@SkyNewsAust) July 30, 2023
Opting for more liquid and established cryptocurrencies can help mitigate liquidity-related issues. Additionally, managed investment schemes often aim to balance upside potential with the protection of downside risk to offer investors a more stable and reliable experience.
Valuing managed investment schemes and shift towards ownership and digital assets
One of the challenges faced by managed investment schemes in the cryptocurrency market is the difficulty in accurately ascertaining the true net asset value (NAV) of the fund. The market’s volatility makes it challenging to determine whether the fund trades at the market price or at a discount to its NAV.
Fund managers must maintain transparency regarding their valuation methods and provide clear redemption windows, allowing investors to exit the fund at a fair price. The increasing interest in cryptocurrencies and managed investment schemes is not solely driven by the potential for financial gains.
It is also motivated by the desire for true ownership and control over digital assets. As individuals experience uncertainties related to social media platforms and digital accounts’ ownership, owning assets on a blockchain, where individuals have greater control, becomes increasingly attractive.
Conclusion
The resurgence of cryptocurrencies has sparked discussions about the necessity of managed investment schemes to provide exposure to these digital assets. While presenting significant opportunities, this development also comes with regulatory, liquidity, and security challenges.
By addressing these concerns, managed investment schemes can bridge the gap between traditional financial markets and the evolving landscape of cryptocurrencies. These schemes offer retail investors a secure pathway to participate in the crypto market’s growth amid the shift towards digital ownership.
If the crypto bull run really is around the corner, new crypto projects may have the most upside potential – check out our list of the top new cryptocurrencies to watch.
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