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The Future of Investing or a Risky Gamble for Family Offices?

Family offices are turning to cryptocurrencies, but it's not all sunshine and rainbows. Also, market-making firms are reducing their digital asset trading activities in the US, while Grayscale is launching three new crypto-focused ETFs.

May 10, 2023

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Welcome to Blockhead's Daily Digest, your go-to source for the latest and most exciting news in the world of cryptocurrency. Our mission is to provide our subscribers with accurate, insightful, and timely coverage of the rapidly evolving crypto space.

As the world becomes increasingly digital, it's no surprise that more and more investors are turning to digital assets as a way to diversify their portfolios. In particular, cryptocurrencies have been making headlines in recent years as a new and exciting investment opportunity.

But what do family offices, some of the most sophisticated investors in the world, think about this emerging asset class? According to a recent report by Goldman Sachs, family offices are increasingly investing in cryptocurrencies. In fact, 26% of respondents currently have investments in this asset class. This is a significant increase from just a few years ago in 2021, when only 16% of family offices were invested in cryptocurrencies.

So why are family offices turning to cryptocurrencies? The report notes that the primary motivations for investing in this asset class include portfolio diversification, speculation, and use in financial applications/DeFi. Additionally, some respondents noted concerns about fiat currency as a motivation for investing in digital assets.

However, it's not all sunshine and rainbows when it comes to cryptocurrencies. Family offices have expressed concerns about regulatory uncertainty, lack of transparency, volatility, fraud, and security risks associated with holding digital assets. In fact, the percentage of those contemplating future investments in crypto plunged to 12% from 45%, the report said.

Love them or hate them, cryptocurrencies are becoming increasingly popular investment options for family offices. While some remain skeptical about their long-term viability and the risks associated with investing in them, others see digital assets as a key part of a diversified portfolio strategy. Changing the general public's skepticism about the long-term viability of cryptocurrencies and the risks associated with investing in them, is another matter.

Now, here's your daily roundup of the biggest headlines for May 10, 2023:

  • Market-making firms Jane Street Group and Jump Crypto are reducing their digital asset trading activities in the US due to increased regulatory scrutiny. Jane Street is also scaling back its crypto ambitions globally due to regulatory uncertainty. Both firms are still making markets, but on a smaller scale.
  • Several corporate giants, including Digital Asset, Goldman Sachs, Microsoft, Deloitte, and Paxos, among others, are collaborating to launch the Canton Network, a new interoperable blockchain that targets institutions and aims to provide corporate controls, risk management, and efficiency required for highly regulated industries by creating a "network of networks." The network will connect independent applications built with Digital Asset's smart contract language, Daml, creating an ecosystem that captures the benefits of public blockchains without certain flaws.
  • Cryptocurrency asset manager Grayscale Investments has filed a registration statement with the US Securities and Exchange Commission (SEC) for three new crypto-focused exchange-traded funds (ETFs). The filing includes an Ethereum Futures ETF, a Global Bitcoin Composite ETF, and a Privacy ETF. The Global Bitcoin Composite ETF would invest in exchange-traded products related to or backed by bitcoin, including bitcoin mining companies. The Ethereum Futures ETF would offer indirect exposure to the potential future value of ether through shares that track its price. The Privacy ETF would invest in companies working on blockchain-based privacy technology. The announcement comes as Grayscale is still involved in a legal dispute with the SEC over converting its $17 billion Grayscale Bitcoin Trust into a spot Bitcoin ETF product.

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