Crypto Investments by Family Businesses Spiked from 16 Percent to 32 Percent in Two Years: Goldman Sachs

The global crypto sector is booming in different parts of the world, currently sitting on a market capitalisation of $1.14 trillion (roughly Rs. 93,54,177 crore). Family businesses around the world are now increasing their investments in digital assets. This update was shared in a recent report by US-based financial behemoth Goldman Sachs in its latest study. In the last two years, crypto investments by family businesses have spiked from 16 percent in 2021 to 32 percent in 2023, the report said.

Goldman said it garnered the participation of 166 family offices from the regions of America, Europe, Asia-Pacific (APAC), and the Middle East and Africa (EMEA). Its report said that out of the present 32 percent family offices investing in digital assets, 26 percent have poured investments in cryptocurrencies.

The remaining percentage of family businesses are also exploring investments in non-fungible tokens (NFTs) as well. Built on blockchains like Bitcoin, Ethereum, Polygon, and Solana, NFTs are digital collectibles that can be inspired by an array of things including artworks, video game characters, and celebrities among other categories. More often than not, NFTs are compatible with metaverse ecosystems and carry a financial value which could provide more liquidity option to NFT holders.

“72 percent of family offices reported a net worth of at least $1 billion (roughly Rs. 8,231 crore). Across products, 32 percent of family offices currently invest in digital assets. Within the digital-asset ecosystem, family offices have become more decisive about cryptocurrencies: the proportion that are invested has risen from 16 percent in 2021 to 26 percent,” the report said.

Apart from cryptocurrencies and NFTs, family businesses are also exploring investment options in blockchain technology, stablecoins, decentralised finance (DeFi), as well as blockchain-focused funds.

Belief in the “power of blockchain technology” has emerged as the top reasons why family offices do not mind keeping an open approach towards the up-and-coming fintech sector. According to a report by Grand View Research, the global market for blockchain technology, which was valued at $5.92 billion (roughly Rs. 48,736 crore) in 2021, is projected to expand at a CAGR of 85.9 percent from 2022 to 2030.

Portfolio diversification, uses of DeFi as an alternative to centralised traditional banking systems, capability of cryptocurrencies to be used as a store of value, and the growing demand of Web3 elements like crypto and NFTs in the metaverse and gaming sectors are other reasons that are driving thriving family businesses towards the digital assets space, the report noted.

While the study by Goldman Sachs indicates at a positive adoption rate for crypto assets, it does not miss to highlight that the number of family businesses not interested in dabbling with crypto assets has also spiked lately, owing to market volatility and the downfalls of promising crypto ventures like FTX and Terra, which left the industry gasping for stability last year.

“The proportion that are not invested (in cryptocurrencies) and not interested for the future has risen from 39 percent to 62 percent,” the report said, while also mentioning that the percentage of family businesses that are potentially interested in crypto investments has fallen from 45 percent to 12 percent in the last two years.

Industry insiders from the digital assets space, however, predict a better future for the sector.

“The successful implementation of new technologies requires taking initial steps, including collaboration between the government and industry players. This collaborative effort can create a regulatory environment that fosters innovation and responsible usage of digital assets,” Rahul Pagidipati, CEO of Indian crypto exchange ZebPay, told Gadgets 360 last week, as India marked its 24th National Technology Day.

Around 45 percent millennials and 46 percent of the gen Z population are approaching cryptocurrencies as a retirement plan in the US, said a recent report by the US-based asset management firm Charles Schwab. The change in the way younger generation is switching jobs and reconsidering financial priorities was ushered in during the COVID-19 pandemic.

---