Steve Kurz, Head of Asset Management at Galaxy Digital, spoke with Julie Cooling, CEO and Founder of RIA Channel, to discuss Galaxy’s new partnership with CAIS. He also explains the advantages of investing in bitcoin, the largest cryptocurrency, and why this store of value asset has seen increased attention and adoption over the past 12 months.
Galaxy Digital recently announced their partnership with CAIS, the award-winning alternative investment platform. The move aims to streamline advisor access to digital assets and provide enhanced education about the emerging asset class. Kurz says that CAIS’ platform will help knock down barriers to entry and expand bitcoin’s potential investor base. The partnership also furthers Galaxy’s mission to educate financial advisors about the role of digital assets in client portfolios. Galaxy will work with CAIS’ innovative learning program, CAIS IQ, to create modularized digital assets content for continuing education credit to support advisors who want to learn more. Based on Galaxy’s polling, 75% of advisors have received questions from their clients about digital assets, and over 50% of advisors expect to recommend a bitcoin allocation to their clients in the coming year. Advisors are craving digital assets information, and Galaxy intents to meet them where they are to help them succeed in the crypto world.
Current Macroeconomic Environment Supports Bitcoin
Uncertainty is plaguing investors, explains Kurz on the current macroeconomic environment. In the U.S., the 2020 budget deficit is expected to reach nearly 20% of GDP, indicating that inflation could be a risk in the coming years. This means that the patterns and tools used in portfolio construction over the past decade are expected to change substantially in the next one. Kurz emphasizes the need for scarce, hard assets as a hedge against potential inflation, and that bitcoin is well-positioned to play this role in portfolios. Bitcoin can help protect portfolios against inflation and market decline due to its fixed supply and growth potential.
The adoption curve going forward shows an increase in bitcoin interest from the institutional world and from wealth channels, a $20 trillion market. Additionally, bitcoin will likely benefit from the generational turnover and rapid increase in digitization currently taking place. This is already evident in the fact that one in five millennials holds bitcoin. Also, Venmo and PayPal are working to allow their user bases to buy and sell the asset. With lessened barriers to entry and a rapidly evolving investment landscape, Kurz anticipates that increased bitcoin adoption will further support its value.
Kurz also weighs in on how bitcoin compares to other portfolio diversifiers. While gold and bitcoin share similar features, for example, there are many characteristics on which they diverge. Kurz explains that bitcoin can be fractionally owned and cross borders with ease, and that it behaves more like a growth asset. While gold is viewed as a stable option, bitcoin is perceived as an exciting, technology-based asset with room to expand market share. Investors could benefit from investing in both assets, suggests Kurz.
The Broader Digital Assets Universe
Bitcoin is the most widely adopted digital asset, but there are more that investors might want to consider. Galaxy segments the broader digital assets universe into three categories: stores of value, payments, and Web 3.0. On the stores of value front, Kurz says bitcoin clearly wins. On the others, several assets are vying for the top spot. Investors interested in the performance of the broader asset class can look to the Bloomberg Galaxy Crypto Index, which Galaxy launched in partnership with Bloomberg in 2018. This index strives to increase data standardization and integrity across the digital assets space, reflecting the different subsections of the asset class and identifying frontrunners.
By applying traditional standards to the new frontier of digital assets, Galaxy aims to meet investors’ accelerating demand with products than can integrate easily into their portfolio mix. Advisors interested in a bitcoin allocation for their clients can consider the Galaxy Bitcoin Funds, which offer low management fee bitcoin exposure with secure third party custody and familiar reporting.
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