Why More Family Offices Use Cryptoassets in 2024

Why Family Offices Choose Cryptoassets in 2024

A recent survey commissioned by blockchain company Matrixport reveals a strong inclination towards digital assets among the world's wealthiest individuals. Key findings indicate that 80% of HNWIs and 70% of family offices express high interest in digital assets, with four out of five actively investing in them over the past year. 

The study highlights a maturation in investment strategies among sophisticated investors, particularly those allocating 25% or more of their assets to digital assets. Accessibility and the potential for better returns compared to traditional assets are driving these growing trends. With revenue in the digital assets market projected to reach €73,210 million in 2024, cryptoassets have now firmly established themselves as more than just a passing fad.

Why family offices are interested in cryptoassets

Cryptoassets have turned from a niche interest to a significant financial sector, gaining mainstream acceptance with digital assets such as Bitcoin and Ethereum leading the way. For family offices, the appeal of digital currencies is multifaceted. 

Firstly, they present a viable diversification option beyond traditional assets like stocks, bonds, and real estate. Secondly, despite risks, the potential for high returns is a significant draw for investors seeking lucrative opportunities. Also, the privacy and control offered by digital assets are inherently attractive to individuals who value discretion in their financial transactions.

The inherent volatility of cryptoassets is a defining characteristic and necessitates a robust risk management strategy. This involves avoiding overexposure to cryptoassets, staying up-to-date on market trends, and preparing for the unpredictable nature of the market. 

When choosing investment channels, family offices favour digital asset-native intermediaries like cryptoasset asset managers over traditional wealth managers or banks. Cryptoasset management encompasses both an individual's own holdings and holdings managed and invested on their behalf by third parties. It is worth noting that cryptoasset management includes various assets, such as digital currencies and digital tokens like NFTs.

Beyond digital currencies, blockchain technology holds applications that extend into many other industries. One example is smart contracts in supply chain management. Understanding these applications opens up new investment opportunities, providing avenues for strategic positions in emerging technologies. There are also many exciting projects and startups within the DeFi ecosystem, including blockchain development companies, digital asset exchanges, and other businesses where family offices can make significant financial returns on their investment.

In addition, the growth of secure tokens and stablecoins, exemplified by PayPal's PYUSD stablecoin, bolsters confidence in the broader cryptoasset market. Stablecoins pegged to traditional fiat currencies provide stability in digital assets, and the potential $10 trillion market for the tokenisation of real assets introduces new opportunities for liquidity and ownership.

While the digital asset market has achieved greater mainstream recognition, it remains characterised by speculative and volatile assets; therefore, stakeholders are advised to collaborate with experienced industry advisors. This is essential for navigating the myriad opportunities, addressing compliance challenges, and preserving generational wealth goals.

Bitcoin's appeal to family offices as a store of value

Family offices, serving as custodians of generational wealth, pursue investment strategies that prioritise long-term value preservation. This is why Bitcoin is an attractive investment. It is recognised for its strong capability as a long-term store of value, providing a solution to concerns related to inflationary pressures and the instability of fiat currencies, particularly in certain regions such as Turkey and Argentina.

After a notable surge in recent months, Bitcoin continues its momentum into February following a robust performance last year, with a remarkable 154% increase in value. In addition, some industry players predict that Bitcoin’s value will soar to $170,000 after the upcoming halving event in April. This means that the price of 1BTC could be worth approximately $400,000 by the end of the year. 

As the era of historically low interest rates concludes, family offices are reassessing their investment strategies. This shift is motivated by a combination of factors, including the anticipation of fluctuating interest rates, concerns about inflation, uncertainties in asset values—particularly in real estate—and the varying trajectories of economic growth. Regarding persistently low interest rates, family offices now employ Bitcoin to offset lower returns on other assets, providing diversification and risk mitigation.

Overall, cryptoassets, particularly Bitcoin, are a valuable addition to the arsenal of family office investment strategies, offering a reliable anchor amidst periods of high inflation and low interest rates. 

If you want to learn more about integrating digital assets into your family office, please contact our team to arrange a meeting.