How transparency and trust drive success in a volatile market
As the demand for robust crypto asset management increases, building and maintaining a competitive edge has never been more crucial. 562 million individuals now own crypto, a 34% increase compared to the previous year. As a result, the market for asset management services is expanding rapidly. In 2023, the market was valued at $742.37 million and continues to grow significantly, expected to reach $903.46 million in 2024 and an impressive $3572.28 million by 2031 - a CAGR of 21.7% from 2024 to 2031. With many firms offering similar services and operational models, end-users can struggle to differentiate providers.
So, how can crypto asset managers stand out from the crowd? This blog explores the importance of trust and transparency and how these elements can enhance your competitiveness to win clients.
What makes the crypto market unique?
Similar to many other financial markets, such as commodities and stock investments, cryptocurrency is notorious for its volatility. However, while traditional markets have been trading for a long time, cryptocurrency has yet to reach the same level of market maturity. Additionally, the crypto market lacks consistent and comprehensive regulation across different jurisdictions to instil market stability.
The crypto market is more easily accessible due to its decentralised nature, 24/7 trading, and lower entry barriers compared to traditional financial markets. Its potential for high returns also attracts investors who might otherwise avoid traditional markets due to a lack of knowledge or experience. Unfortunately, these new investors, often less equipped to navigate the complexities of crypto, are more vulnerable to its unique risks. Cyber-attacks, malware, and other hacking techniques are present in other markets; however, crypto is a more attractive target for bad actors due to its anonymity, lack of regulation, high prices, and, in some cases, easy targets.
Another critical aspect of crypto is the inherent risk in accessing and managing assets. Unlike traditional markets, where centralised institutions handle security, crypto investors face a unique challenge: they must either manage their private keys or seed phrases or entrust them to an asset manager. This means that for those opting for self-custody, the responsibility—and the associated risks—rests entirely on their shoulders. Investors may consider turning to asset managers to mitigate these risks as their portfolio grows. However, this shifts the burden to the asset managers responsible for safeguarding these digital assets. Poor management of private keys can result in permanent loss of access, making the stakes significantly higher in the crypto space.
How has this impacted investor confidence?
While crypto volatility can present lucrative opportunities, it also brings significant risks, especially when combined with regulatory uncertainty and market vulnerabilities. Markets don’t always move in the investor’s favour, and this unpredictability should be met with caution. A survey commissioned by CoinCover found that 29.8% of consumers expressed concern about cryptocurrencies, compared to 24.9% for AI, 18.2% for the metaverse, and 8.5% for the Internet of Things. Additionally, another survey indicates that 48% of investors worry about the lack of protection if something goes wrong with their crypto investments, while 52% fear the possibility of being scammed. These statistics underscore the deep-seated doubts and concerns that continue to erode investor confidence in the cryptocurrency market.
How can transparency help asset management firms thrive?
Transparency in crypto asset management is about maintaining open, honest, and clear communication, particularly concerning the risks associated with holding and using cryptocurrencies. In an industry riddled with uncertainty, a transparent approach leaves no room for mistrust, ensuring clients feel secure and well-informed when utilising their asset manager’s services. By openly discussing the risks, strategies and processes involved in crypto investment, firms can demystify the complexities of the market and set realistic expectations for their clients.
Transparency also cultivates a sense of security. When clients fully understand how their investments are managed, the proactive measures in place, and risk mitigation strategies, they are more likely to feel confident in their service provider. This confidence is crucial in building and maintaining strong client relationships.
By fostering trust and credibility through transparency, asset management firms can enhance client loyalty, increase retention, and support long-term growth. Transparency can be a key differentiator in a competitive landscape where many firms operate with similar business models. It sets a firm apart by avoiding jargon and vague promises, offering clients a clear and reliable understanding of their investment journey.
What steps can be taken to build trust in a competitive landscape?
Building trust with clients is gradual, but a transparent approach can significantly accelerate this journey. To establish transparency, firms should take deliberate steps to ensure clients are appropriately educated in the crypto risk landscape and understand the mitigation measures available to them.
Education as a tool to increase retention
Educating your clients about the risks associated with cryptocurrency is not merely a duty – it’s a strategic way to demonstrate a firm’s genuine concern for the financial well-being of its clients. By proactively guiding clients through potential dangers before investing, asset managers empower them to make informed decisions. This educational approach bolsters credibility and fosters a deeper level of trust, encouraging clients to view their firm as a reliable partner. As a result, these informed and reassured clients are more likely to become advocates of their firm, trusting their commitment to its clients’ security and financial success.
Is education alone enough?
Education is a critical first step, but it’s not sufficient on its own. While educating clients about the inherent risks of crypt is essential, firms must take additional steps to protect assets. This includes robust security protocols, continuous monitoring of vulnerabilities, and ongoing improvements to protection strategies. By adopting a proactive and committed approach to asset management, firms can build deeper trust with clients and establish themselves as leaders in the industry.
How can CoinCover help your firm provide the highest standard of protection?
The rapidly evolving crypto landscape presents ever-changing risks, making it challenging for any single firm to keep pace. At CoinCover, we recognise that business and your client asset protection shouldn’t compromise operational efficiency.
CoinCover offers advanced transaction monitoring techniques and key-backup services, ensuring comprehensive protection against the risks of holding and using cryptocurrencies. Our technology helps mitigate threats like theft, fraud, and loss, keeping digital assets secure. With 24/7 real-time threat detection and a seamless key-recovery process, CoinCover provides protection exceeding industry standards and complements any reputable firm's goal of excellence.
Transparency is a powerful differentiator, helping to build trust by being honest about market risks and demonstrating a strong commitment to mitigating them. To truly differentiate from the competition, it is crucial to pair educational efforts and security measures with additional measures that go beyond what is standard in the industry. By combining transparency with enhanced security solutions, such as those offered by CoinCover, your firm can stand out as a trusted leader in the crypto space.
Book a meeting with the CoinCover team to discover how we partner with asset managers to mitigate risks as the leading blockchain protection provider in the ever-evolving crypto landscape.