Why crypto asset management matters and what options are available for individuals and businesses (SMEs) who want to enter cryptocurrency markets.
Cryptocurrency has seen accelerated growth in the past few years with SMEs, investors and individuals taking the asset class more seriously than ever.
Crypto asset management has evolved into an all-encompassing approach, where firms are not just looking to hold Bitcoin or Ether but extending exposure to Non-Fungible Tokens (NFTs), Decentralized Finance (Defi) protocols and other digital assets.
In this article, we highlight the journey crypto has been on in recent years and the importance crypto asset management has for any investors looking to gain exposure to digital assets.
Crypto growth in 2021
According to a report from the World Economic Forum(WEF), 2021 saw cryptocurrency market capitalization grow by 187.5%. While Bitcoin’s (BTC) price appreciation was almost 60%, this paled in comparison to the 190% gain Polkadot (DOT) saw, the 400% increase in price Ethereum (ETH) experienced (at the time of writing) or the eye-watering 11,177% return from Solana (SOL).
Corporate and nation-state adoption of crypto assets primarily drove the growth in the space. A few notable events across 2021 were:
- MicroStrategy adding further Bitcoin holdings to their balance sheet, holding over US$6b in Bitcoin in December 2021 [source]
- Tesla purchasing US$1.5b in Bitcoin to its balance sheet [source]
- Block (formerly Square) adding US$170m in Bitcoin to its balance sheet [source]
- Elon Musk confirming that he personally holds Bitcoin, Ether, and Dogecoin [source]
- El Salvador approving Bitcoin as legal tender [source]
- The city of Rio De Janeiro allocating ~1% of its treasury reserves to crypto-assets [source]
- KPMG Canada adding Bitcoin and Ether to its balance sheet [source]
While many token prices have pulled back since late 2021, especially recently, investment interest within the crypto sector remains higher than ever. A recent Bloomberg report stated US $30B in funds were invested into the crypto space. This adds up to more than has been invested every year from 2012 to 2020 combined.
Crypto asset management for SMEs
With crypto rapidly solidifying its position as a legitimate option for corporate balance sheets, enterprise-level adoption requires appropriate business crypto asset management solutions. However, with numerous methods to secure and manage holdings, it can be just as confusing for existing crypto market participants as it is for new entrants.
As of May 2022, the entire cryptocurrency market capitalization (the value of all crypto assets), is approximately US$1.3 trillion, according to CoinGecko. This large amount of capital now sitting within the crypto sector has led to more crypto investors seeking secure custody options for their digital assets.
From cold to hot wallets and hardware wallets (such as Ledger and Trezor), there are many options for those looking to secure their cryptocurrencies via self-custody.
Other crypto asset management options that have increased in popularity are software wallets (like MetaMask, Trust Wallet, Argent, and Rainbow), which also allow individuals and corporations to manage and hold their own private keys. Third-party options for private key management such as crypto exchanges and custody providers can also provide stress-free and low-cost options for those not wanting to take sole responsibility for holding their own keys.
Crypto custody questions
If you (as an individual investor or a business) are looking to secure your digital assets with a custodial service, there are several scenarios you should consider to ensure your crypto asset management is up to standard:
- What happens if your private keys or passwords are lost or stolen?
- Are your assets safe (no risk liquidation risk) in the event a flash crash or market downturn occurs?
- How does your custodian prove your assets are held with them?
- If your digital assets are earning yield — are they exposed to a DeFi protocol (and if so, has it been audited)?
- Who is authorized to approve transactions on your behalf?
- Are your assets stored on-chain or with an exchange?
- How quickly can you withdraw your crypto assets if necessary?
If you can answer most, or all the above questions and feel strongly your chosen custodial solution is appropriate, you are likely to be more prepared when quick decisions need to be made regarding your crypto asset management.
Smart contracts, hacks, and exploits
If your crypto assets are tied up in DeFi protocols, crypto asset management is critical to ensure your funds are as secure as possible. 2021 saw crypto participants lose US$10.5b to hacks, exploits, and theft from major DeFi platforms, according to a November report from Elliptic.
If you are utilizing DeFi protocols in order to generate yields from your digital assets, it’s worth noting that the platform may have vulnerabilities that could lead to loss of funds.
In May 2022 the Terra LUNA ecosystem came crashing down, wiping over US$40b worth of value from a top 10 crypto project, and leading to a loss of peg of UST (from its intended $1) to a low of under 10c. During the same time, LUNA’s value cratered over 99%, rendering the token essentially worthless.
While it’s worth being safe in this relatively new space, DeFi protocols (such as AAVE and Compound) have operated with minimal user fund losses for a number of years. It’s worth checking how widely-known a given platform is before you start providing liquidity, engaging in yield farming or depositing your cryptocurrencies into them. Taking crypto asset management seriously is fundamental to protecting your funds and your digital assets from scenarios where they may be more vulnerable to losses.
Next steps for SMEs looking for crypto custody solutions
As 2022 continues and the growth within the crypto sector shows no signs of slowing down, it may be worth looking into crypto asset management options that suit you (or your business).
The most important things are sometimes the simplest when it comes to crypto asset management. This can include creating an internal policy outlining who has access to passwords, private keys and certain wallets, all in order to ensure your funds are as secure as possible at all times.
If you are an individual or represent an enterprise looking for exposure to crypto and digital assets, learn more about setting up a Unido EP wallet here.
About Unido EP
Unido EP takes the complexity and expense out of digital asset management for organizations with sophisticated corporate governance needs. Our patented, end-to-end platform seamlessly automates corporate governance and self-custody of crypto assets so you can securely store, manage and invest in crypto without massive overheads.
Unido EP comes with a web-based dashboard and a decentralized application (dApp) featuring a robust set of Defi tools, easy-to-set-up authority regimes and iron-clad security. All of this is inside a complete digital asset management platform, built with financial institutions in mind but tailor-made for any organization or individual’s needs.
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