Bitcoin boomers: Australia’s richest families are buying up cryptocurrency
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Wealthy Australians are increasingly investing their family fortunes in digital assets, as the conservative go unconventional and alternative investments become mainstream.
In a world of rock bottom interest rates, money has been flooding into riskier assets as investors go looking for yield and cash in on surging prices. It’s no different for the rich and powerful, who are using family offices – privately held companies used to invest their personal wealth – to direct millions of dollars into cryptocurrencies.
Technology investment company DigitalX (ASX:DCC) is seeing the trend firsthand, helping those very offices and trusts transact in a space that is quickly maturing, according to executive director Leigh Travers.
“The biggest change has been around institutional interest which has helped evolve it from a speculative asset to an asset that is part of a diversified portfolio and has the strongest macro winds of any investment possible I think,” Travers told Business Insider Australia.
“As a conservative family office investing for the long term, they don’t want to be associated with something considered as a speculative frenzy.”
While the bull run of today might echo the boom and bust of 2017-2018, it feels very different. The rise of genuine decentralised finance (DeFi) projects is one example Travers gives, although it is notable that meme coins and ‘pump and dump’ schemes still prevail today.
With the average family office in Australia and New Zealand controlling more than $600 million each, however, it signals just how ubiquitous the asset class is becoming among investors of all stripes.
The sudden appetite has been made clear in sparking the run higher since late last year, helping to attract more outside interest in turn. The value of digital assets held by DigitalX swelled by more than 237% over the first three months of the year, with investors unperturbed by the fact that the assets remain largely unregulated in Australia.
“A family office might have something like a 3% exposure to gold, and I think that’s the first part of the portfolio that Bitcoins are replacing,” Travers said.
But it would be unfair to categorise Bitcoin as simply a “digital gold”, or a hedge against inflation.
“As markets have become flooded with cash, bonds and stocks have become expensive and investors have gone looking increasingly to alternative investments to find returns. As an alternative investment with liquidity, there’s nothing quite like it.”
Nor is it just Bitcoin. While DigitalX only trades the most established coins, there are plenty of options outside of BTC. Travers reveals that its portfolio also holds coins with very different uses including Ethereum, Binance, Cardano and Polkadot.
“Bitcoin is obviously a store of value which is really attractive in a world of excessive monetary printing. Ethereum is looking to disrupt the Googles and Apples of this world as a decentralised computing network which means you can cut out the rent seeks taking 30% of revenue,” he said.
“Then you’ve got the fastest growing area in the digital asset market which is DeFi, where you’re seeing companies have the same growth in a month as what traditional finance companies might have in four years.”
Instead of trying to pick individual coins, DigitalX says the smart money is backing the infrastructure that underpins cryptocurrency projects.
Even the rich aren’t immune to a fear of missing out, or FOMO, Travers says.
“Family offices want to know what the upside is [and] they want to understand what others are doing in terms of family offices in the market because they’re intensely competitive, they want to win and they obviously don’t want to be the last one that’s sort of moving towards a new investment.”
It marks a growing appetite in all corners, from everyday Australians to fund managers, for digital assets. Progress has been more more rapid overseas where companies like Tesla and Square have moved early to get exposure to the likes of Bitcoin, but it is slowly creeping into Australian markets as well.
Just last week Business Insider Australia revealed the ASX is currently assessing a number of applications for a local exchange-traded fund (ETF). A launch tipped for later this year would enable any Australian to hold major cryptocurrencies in their share portfolio.
One of those firms lining up locally to get involved is the $US50 billion global investment manager VanEck, which is one of several funds vying to trade crypto on the ASX.
“With the crypto asset movement becoming more mainstream and extending on our global leadership in offering investors opportunities in digital assets, we are pleased to advise that we are exploring a Bitcoin ETF on [the] ASX,” VanEck Asia Pacific CEO and managing director Adrian Neiron said in a statement.
“In Australia, we are extending on our mantra of ‘access the opportunities’ and believe this opportunity will democratise the crypto asset complex for all types of investors. The ETF vehicle is the optimal delivery mechanism and we look forward to working with the ASX to further innovate and provide this unique opportunity.”
It wouldn’t be VanEck’s first foray into crypto funds. Recently, it has launched two exchange-traded note (ETN) in Europe which now collectively holds more than $US450 million in Bitcoin, with an application to list an ETF in the United States.
Local cryptocurrency exchanges meanwhile have already enabled thousands of Australians to invest their superannuation in the space in response to organic demand.
It clearly hasn’t escaped family offices which way the wind appears to be blowing.