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Crypto Robo-Advisors Are Fueling the Rise of Long-Term Investors

Kevin O’Brien · @kevinobrienm | Nov 01, 2018 | 03:00

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Cryptocurrency robo-advisors like New Wave Capital continue to grow despite bear markets in 2018. Some think their popularity could rope in more outsiders to invest in digital currencies for the long-term.   

2018 has been a rough year for crypto prices. The ripple effects have been felt across exchanges and other major institutions within the industry.

However, cryptocurrency robo-advisors like New Wave Capital seem to be weathering the storm.

The investment firm recently noted how more customers have signed up to invest even amid a downturn.

The idea behind robo-advisors like New Wave Capital, which launched in July, is to appeal to regular people who are looking to invest in virtual currencies. The company assesses a person’s investment risk tolerance via an algorithm and then distributes the money people are willing to invest across various cryptocurrencies in a tailored fashion.

A Growing Crypto Robo-Advisory Industry

A few other companies, like Automata and Empirica have built platforms based on algorithms to enter into the robo-advising world.

Automata touts itself as “the first robo advisor specifically tailored to protect your capital” by tailoring an investment strategy after listening to a person’s needs.

On the other hand, Empirica advertises their platform as a “white label solution” for cryptocurrency portfolio managers and firms who want to help customers by gauging risk to cultivate an appropriate investment portfolio.

There are other entities, like Grayscale’s Digital Large Cap Fund, that let people become exposed to a swath of digital currencies.

However, the focus of the growing number of robo-advisory firms is not institutional investors. Rather, it’s regular people who may think investing in virtual currency is exceedingly risky or complicated.

Increasing Comfort by Automating Finances

The general idea of robo-advisors began to gain a more attention after the 2008 financial crisis when people lost faith in traditional financial advisors. Some were also fed up with growing fund management and advisory fee structures for human advisors.

Others think the robo-advisory trend will continue to pick up steam inside of the cryptocurrency world because more people are interested in automating their finances.

A survey carried out by Charles Schwab earlier in the fall revealed how 25% of more than 1,000 respondents were eager to automate their day-to-day finances.

More than half (56%) wanted controlling their finances to be “as simple as booking a hotel room.”

Even though the general sentiment was that people still wanted interaction with a person when it came to advisory services, half said robo-advisors would make the biggest impact across the financial landscape.

When asked about how the market downturns in 2018 have affected investing, New Wave Capital CEO Eric Campbell explained how customers who

[…]sign up during a downturn have more of a long-term approach to investing.

Chief Product Officer Albert Cheng noted that New Wave’s robo-advisory service had a focus on driving “long-term thinking:”

If people are holding their portfolios for a long time, I think it’s prudent to have exposure to multiple coins. True paradigm shifts take a long time.

Would you be comfortable with using a crypto robo-advisory service to invest? Let us know in the comments!

Images courtesy of Bitcoinist archives, Shutterstock.