• This article covers the key dilemmas in crypto investing and how different investment models can be applied to cryptocurrency investing.
• It provides insight into simple buy-and-hold strategies, automated indices, and discretionary management.
• With tools emerging for advisors, they can determine how to include this asset class alongside their traditional investment business.
Setting Boundaries: Defining Active and Passive Management for Crypto
Crypto investing has become a major topic of interest for financial advisors in recent years as digital assets continue to gain traction. To help navigate the complex world of cryptocurrency investments, it is important to understand the difference between active and passive management approaches. In this article, we break down these two distinct approaches in three ways – simple buy-and-hold strategies, automated indices, and discretionary management – plus provide questions spurred by the BlackRock ETF application.
Simple Buy-And-Hold Strategies
One of the most basic forms of active crypto investing is simply buying a certain amount of an asset and holding onto it until you want to sell it later on. This type of strategy does not involve actively tracking the markets or trying to time trades; instead, investors are simply buying undervalued assets with an expectation that they will appreciate over time. While there is no guarantee that this strategy will work out in your favor every time, it could be beneficial when done correctly as long as you take into account any potential risks associated with your chosen asset(s).
Automated Indices
Another form of active crypto investing involves using automated indexing services such as SMA platforms or portfolio tools. These services allow investors to choose from a set list of cryptocurrencies that are then automatically rebalanced based on predetermined parameters such as market capitalization or volatility levels. Automated indexing services offer investors more control over their investments since they can decide which coins they would like included in their portfolios and how often they would like them rebalanced. However, these services also require constant monitoring since indicators may change over time leading to unexpected outcomes if not managed properly.
Discretionary Management
The third form of active crypto investing is known as discretionary management. This approach involves making decisions about individual trades based on an investor’s own research and analysis rather than relying solely on automated processes or algorithms created by a third party service provider. Discretionary trading requires more work than other options since investors must track markets closely and continuously look for opportunities to capitalize on favorable conditions while minimizing losses during unfavorable ones; however, this type of active trading can potentially yield higher returns than those obtained through simpler buy-and-hold strategies or automated indexing services if done successfully.
Questions Spurred By The BlackRock ETF Application
With the recent announcement that BlackRock has filed an application with the SEC for a Bitcoin exchange traded fund (ETF), many questions have been raised about how such an offering might affect crypto markets going forward – especially given its potential implications for institutional investors who may be looking for a way to access digital assets without having direct exposure themselves via mining operations or individual wallet holdings . As such , it remains unclear whether BlackRock’s ETF proposal will receive SEC approval but one thing is certain: regardless of what happens with this particular ETF , advisors should remain cognizant about how changing regulatory frameworks could impact their clients’ holdings going forward .