Understanding Crypto Asset Management: Definition, Benefits, and Strategies

There comes a time when you may find yourself in a dilemma of buying a real estate property or buying stock market shares. Or you may want to diversify your investment and buy both. On this occasion, you may make a profit in one and lose money in another investment option. Therefore, you will need to keep track of them and manage your investments. Similarly, cryptocurrencies are digital real-estate properties of our time, and managing them requires tracking tools and expertise. Crypto asset management is defined as the practice of buying and selling cryptocurrencies and tracking losses or profits in your portfolio.

As mentioned earlier, the practice of asset management requires expertise and an understanding of the cryptocurrency market. Here in this post on Finestel, we tried to provide tutorials on what is crypto asset management together with a comparison of fund management. We started our journey with a definition of the crypto asset management concept and the terms that may be confusing for traders, like fund management and asset management. Then, we discussed the basics of asset management like AMU, Mutual funds, and Hedge funds. Finally, we provided the readers with the tools and services used for successful asset management. Hopefully, this post will help the readers learn the basics and then proceed with managing their assets individually or with institutional help.

What Are Crypto Assets?

A crypto asset is a digital asset that uses cryptography to secure and verify transactions and to control the creation of new units. Cryptocurrencies, such as Bitcoin, Ethereum, and Litecoin, are the most well-known examples of crypto assets. However, crypto assets can also include tokens, which are digital assets that represent a specific asset or utility, such as a share in a company or access to a particular service.

Terminologically, crypto assets are virtual currencies using cryptography for security, and they operate on a distributed ledger called the blockchain. The blockchain is the technology behind crypto, where the transactions are linked in a decentralized peer-to-peer network. Furthermore, they are secure due to decentralization, and no central authority can access these assets. So then, the people realized that they could use crypto to store value, buy and sell goods, or maintain the value of their digital artworks.

Are Cryptocurrencies Considered Assets or Liabilities?

According to IFRIC, financial assets must have specific characteristics to be considered financial assets. Conforming to International Accounting Standard 32, or IAS 32, financial assets have the following characteristics:

• Acceptance as a payment method
• Interest ownership of an entity
• Contractual rights to exchanging financial assets
• Contractual right to receive assets from another entity

What was mentioned was an outlook of governmental entities and how they define crypto as financial assets. However, the definitions provided by governmental bodies are conservative and not updated. Nevertheless, some clues show cryptocurrencies are typically considered assets like they can be owned, traded, and utilized as a medium of exchange. In brief, according to accounting and governmental bodies, cryptocurrencies are not assets but liabilities. On the other hand, according to the features that are growing daily, like trading, exchanging, and ownership of cryptocurrencies, they are financial assets.

Types of Crypto Assets

Crypto assets are varied and are expanding based on the functions they offer. In fact, the types of crypto assets depend on their function, and here we provide a list of them.

1. Coins: Coins are a type of cryptocurrency that operates on their own blockchain network. Examples of coins include Bitcoin, Litecoin, and Monero. Coins are used primarily as a medium of exchange and store of value.
2. Tokens: Tokens are digital assets that are created on top of an existing blockchain network, such as Ethereum. Tokens can represent a variety of assets or utilities, such as shares in a company, access to a particular service, or voting rights. Tokens can be used for a variety of purposes, such as fundraising, incentivizing users, and creating decentralized applications.
3. Stablecoins: These are cryptocurrencies that are designed to maintain a stable value, usually by being pegged to a fiat currency, such as the US dollar. Stablecoins can be useful for traders who want to avoid the volatility of other cryptocurrencies.
4. Security tokens: These are tokens that represent ownership in a real-world asset, such as a company, real estate, or artwork. Security tokens are subject to securities regulations and can be used for fundraising or investment purposes.
5. Non-fungible tokens (NFTs): These are unique digital assets that are not interchangeable, such as digital art, collectibles, and in-game items. NFTs are often used in blockchain-based games and marketplaces.

We listed just a few examples of crypto assets, and there are still other crypto asset types like Governance Tokens, Cryptocurrency ETFs, and Blockchain funds.

What Is a Crypto Asset Management Tool?

A crypto asset management tool is a software or platform that helps individuals or businesses manage their cryptocurrency assets. They can be used by both novice and experienced investors to manage their cryptocurrency portfolios effectively and securely.

These tools can provide a range of features and services, including:

• Portfolio tracking: Crypto asset management tools can help users track the performance of their cryptocurrency portfolios, including the value of their holdings, historical price trends, and other key metrics.
• Market analysis: These tools can provide users with real-time market data and analysis, including price charts, market trends, and news updates, to help them make informed investment decisions.
• Automated investment recommendations: Some crypto asset management tools use algorithms and machine learning to provide users with automated investment recommendations based on their investment goals and risk tolerance.
• Custodial services: Many crypto asset management tools offer custodial services, which provide secure storage and transaction processing for cryptocurrency assets.
• Non-Custodial services: Due to the increased need for security, there has been a significant rise in the use of noncustodial asset management tools. As a result, the number of these tools available in the market is also increasing.
• Risk management: Effective crypto asset management requires the ability to identify and manage financial risks, including market volatility, security threats, and regulatory changes. Crypto asset management tools can help users mitigate these risks by providing risk management tools and strategies.

Overall, crypto asset management tools are designed to help users manage their cryptocurrency assets more effectively and securely by providing a range of features and services that can help optimize the use of these assets, maximize their value, and minimize risks.

History of Asset Management

Asset management has a long story, and it synchronously emerged with the existence of financial markets. Alice Walton, one of the owners of Walmart, elaborates on the term, “My greatest responsibility is to manage my assets wisely, so they create value.” The early origins of asset management date back to ancient civilizations, and wealthy individuals let their trusted individuals manage their wealth.

Then, the current concept of asset management started to shape with the advent of Investment Funds in the 18^th century. After that, Alfred Winslow Jones created the first market-neutral portfolio in the 20^th century to mitigate the risks in a volatile market. After the event, mutual fund companies in the United States emerged, and professional asset managers invested in individual assets. From then on, the modern asset management industry has seen significant growth along with globalization, financial innovations, and technological advancements.

 What is Assets Under Management (AUM)?

Assets under management are the total market value of assets that institutions like mutual funds, banks, and management firms manage on the client’s behalf. The term AUM is a metric used to measure the overall assets and the size of assets under management. For instance, suppose you have $1000 BTC, $2000 ETH, and $2000 LTC in an investment fund; then your AUM Will be $5000.

The asset types include equities, securities, cash, and cryptocurrency, to name a few. The AUM is subject to change over time due to several factors like investment performance, client’s investments, and market volatility. In addition, as an investor, there are some rules and measures by institutions that you must know. For example, the institutions may lock up your funds for a few months to control the net inflows and outflows. Finally, the AUM size is also important; a larger AUM indicates higher revenue.

How to Calculate AUM

There is no single formula for calculating AUM, and it varies by company. This variety is due to the variables the institutions include in their calculation. These variables are deposits, mutual funds, and cash. However, larger companies with an AUM of more than $25 million in the United States must register with the SEC (Securities and Exchange Commission). The SEC is a regulatory body that ensures financial markets’ functionality in a fair environment. Generally, asset management firms provide guidelines and instructions for calculating AUM.

Notwithstanding the differences, the following example can demonstrate how AUM calculation works. Suppose the mutual fund for stocks is $5 million, corporate bonds $2 million, and government bonds $1 million; then the AUM will be $8 million. Finally, note that the AUM is not steady due to market conditions and many other factors and may fluctuate over time.

AUM vs. NAV

NAV stands for Net Asset Value, which refers to the value of an investment fund. AUM and NAV are both measurement tools for the management of investment portfolios. Considering the differences, AUM is the measurement of firms’ total value of investment funds. However, NAV is a measurement of investment funds per share or unit. AUM and NAV have different functions.

NAV measures an individual’s investment funds, while AUM measures the total assets that a mutual fund firm manages. Unlike AUM, the conditions that change the value of NAV are not external, and the NAV fluctuates due to fluctuations of an underlying asset. Regarding the similarities, they are both financial metrics that access and analyze investment portfolios and provide different insights for asset managers and investors.

Who Is a Crypto Asset Manager?

After knowing about crypto asset types, the history of asset management, and the differences between AUM and NAV, it’s time to ponder who is a crypto asset manager. A crypto asset manager is an individual or a firm that manages clients’ digital assets and investments. They are mostly professional traders and know about blockchain systems and crypto market analysis.

There are several roles and expertise that a crypto asset manager must follow. First, they are responsible for their portfolio and conduct strategies that maximize return. Second, a crypto asset manager analyzes the market by the tools they have so they can make informed decisions. Next, a crypto asset manager should take technical measures to ensure the investor’s funds are safe. Finally, they communicate with investors to provide them with reporting and advisory guidelines.

Qualifications and Skills Required to Become a Crypto Asset Manager

Undoubtedly, a crypto asset manager must be knowledgeable and expert in this field. However, we briefly discussed each and listed some required skills to become a crypto asset manager.

To become a crypto asset manager, several qualifications and skills are typically required. These include:

1.  Strong understanding of cryptocurrency: A deep understanding of the cryptocurrency market, including its history, trends, and future potential, is essential for effective crypto asset management.
2. Financial expertise: A background in finance, economics, or accounting is often required, as crypto asset management involves making strategic investment decisions and managing financial risks.
3. Technical knowledge: A strong understanding of blockchain technology and other technical aspects of cryptocurrency is important for effective crypto asset management.
4. Analytical skills: The ability to analyze market trends, evaluate investment opportunities, and make data-driven decisions is critical for success in crypto asset management.
5. Risk management skills: Effective crypto asset management requires the ability to identify and manage financial risks, including market volatility, security threats, and regulatory changes.
6. Communication skills: Strong communication skills are essential for building relationships with clients, explaining investment strategies, and providing regular updates on portfolio performance.
7. Professional certifications: Professional certifications such as the Certified Bitcoin Professional (CBP) or the Certified Cryptocurrency Investigator (CCI) can demonstrate expertise and credibility in the field of crypto asset management.

Overall, becoming a successful crypto asset manager requires a combination of technical knowledge, financial expertise, analytical skills, and strong communication and risk management abilities.

How to Choose a Reputable Crypto Asset Manager

After explaining the features of an asset manager, let’s explore the features to identify a reputable crypto asset manager. One of the most important things the people these days possess is money. Not noticing how you have it and how to use it is also important. Hence, it is essential to identify and then choose a reputable crypto asset manager since you trust them to manage your investment. Here, we provided some factors to consider before choosing a reputable crypto asset manager.

• Check if they are reputable regarding any scam reports, performance history, etc.
• Look for the team’s qualifications, educational background, contributions to the market, etc.
• Explore their investment goals, strategies, etc.
• Understand how they mitigate market volatility.
• Check if they have active and responsive customer service.

Asset Management Vs. Robo-Advisory

Asset management and robo-advisory are two different concepts in the financial industry.

Asset management refers to the professional management of assets, such as stocks, bonds, and real estate, on behalf of clients. Asset managers use their expertise to make investment decisions and manage portfolios to achieve the client’s financial goals. Asset management can be done through various channels, including mutual funds, exchange-traded funds (ETFs), and separately managed accounts.

Robo-advisory, on the other hand, is a type of asset management that uses algorithms and technology to provide automated investment advice and portfolio management. Robo-advisors use client data and risk tolerance to create a customized investment portfolio, which is then managed by the algorithm. Robo-advisory is typically offered through online platforms and is often more affordable than traditional asset management services.

While both asset management and robo-advisory involve the management of assets, they differ in terms of the level of human involvement and the use of technology. Traditional asset management relies on human expertise and decision-making, while robo-advisory relies on algorithms and technology to manage portfolios.

Fund Management Vs. Asset Management

Asset management is an umbrella term, at it includes fund management too. Fund management and asset management are intrinsically related to the management of investors’ funds. However, the difference comes from what type of assets they manage. Generally, fund managers deal with specific types of funds like mutual funds, hedge funds, or ETFs. However, asset management is managing various assets like bonds, commodities, and real estate, to name a few.

Additionally, fund managers focus on investment strategies and control bond funds or equity funds. While the asset managers’ primary focus is on financial planning, tax optimization, and retirement planning. Finally, asset management is a broader concept involving more services than fund management.

Asset Management Vs. Hedge Fund

If we want to compare asset management and hedge fund concepts, there is no word better than aggressive. Asset management and hedge funds are both investment management approaches. However, asset management is more conservative, and hedge funds are aggressive in strategy. The primary goal of asset management is high returns and low risks. On the other hand, hedge funds strategy is only high return, and their approaches indicate that risk and portfolio management are the least important.

Additionally, asset management concerns investment diversification, risk management, and portfolio management. However, hedge funds’ primary focus is on high returns using leverage and short selling, and the strategies ignore market conditions. Regarding fee structure, hedge funds charge more and include performance fees. To conclude, hedge funds are riskier with potentially high returns, and asset management is more conservative and has fewer returns.

Differences Between Mutual Funds and Hedge Funds

Mutual funds and hedge funds both have the same function of achieving higher returns. Nevertheless, the difference is in how they achieve this ambition. Mutual funds are more accessible for investors, and they follow a transparent strategy. However, hedge funds offer more investment flexibility to high-net-worth investors. So again, the differences are in the approach they follow, and we have listed some.

• Mutual funds are regulated, and they comply with rules and restrictions
• Mutual funds are offered for individual investors with a minimum deposit requirement
• Hedge funds are more flexible in strategy
• Mutual funds have no lock period and are more liquid
• Hedge funds charge more fees

To sum up, mutual funds are more transparent and follow a set of rules and regulations, while hedge funds use many techniques and strategies disregarding market conditions.

Crypto Portfolio Management Vs. Asset Management

Crypto portfolio management and crypto asset management are two related but distinct concepts in the world of cryptocurrency investing.

Crypto portfolio management refers to the process of managing a portfolio of cryptocurrencies and other digital assets. This includes selecting which assets to invest in, monitoring their performance, and adjusting the portfolio as needed to achieve investment goals. Crypto portfolio management can be done by individual investors or by professional portfolio managers.

Crypto asset management, on the other hand, refers to the management of a larger pool of digital assets, often on behalf of institutional investors or high net worth individuals. Crypto asset managers typically have a more sophisticated investment strategy. They may use a variety of investment vehicles, such as hedge funds or private equity funds, to manage their clients’ assets.

While there is some overlap between crypto portfolio management and crypto asset management, the latter typically involves a higher level of expertise and a more complex investment strategy. Crypto asset managers may also have access to a broader range of investment opportunities and may be able to negotiate better terms with exchanges and other service providers.

Overall, both crypto portfolio management and crypto asset management are essential for investors who want to participate in the growing world of cryptocurrency investing. Whether you are managing your own portfolio or working with a professional asset manager, it’s essential to do your research and understand the risks and potential rewards of investing in digital assets.

What Are the 3 Types of Portfolio Management?

You have two options when you decide to use your idle assets and make a profit. First, you know the trading strategies and proceed with trading, holding, or lending assets. Second, you may be unfamiliar with the cryptocurrency market, and at the same time, you do not want to lose this investment opportunity. Hence, you will need a portfolio manager to diversify or manage your funds. The portfolio manager will analyze and consider your investment goals and choose among the following portfolio management types to manage your funds.

1. Active Portfolio Management: Continues monitoring of market, research, analysis, and trading
2. Passive Portfolio Management: It’s more specific, also called index-based, and replicates the performance of a specific market. More time is required to make a profit with lower costs.
3. Strategic Portfolio Management: Designing an investment strategy based on investors’ goals and risk tolerance

Challenges of Portfolio Management

Portfolio managers constantly conduct several strategies to make a portfolio profitable. However, there are numerous challenges and obstacles that they should overcome. Some of these challenges are as follows.

• Market conditions constantly change due to market volatility
• Risk factors like market risk, liquidity risk, and credit risk
• Gauging the performance is highly subjective
• Dealing with investors since their fear and greed can lead to irrational decisions
• Portfolio management is subject to regulatory compliances and must be aware of up-to-date rules and changes.
• Portfolio managers are overwhelmed with information and must check for financial statements, market trends, and economic data.
• Technology is growing rapidly, and managers should learn how to use technology to maintain a secure and robust portfolio.

What we mentioned was just an overview of portfolio management challenges, and a successful manager should adapt strategies to handle these obstacles.

Different Types of Asset Management Tools and Services

Technological advancements in all fields are soaring, and asset management is no exception. Therefore, software companies have designed many tools for assisting individuals with managing their assets. These tools and services cover the main challenging issues, as we mentioned. Here, we provided a list of these tools and services in brief.

1. Portfolio management tools used for tracking performance analysis, asset allocation, and monitoring
2. Tools used for planning include features like goal setting, tracking progress, and budgeting
3. Research platforms that enable market analysis, data analysis, and fundamental market analysis
4. Automated investment recommendation tools based on goals you provide and questionnaires you fill
5. Custodial services that provide transaction processing and help you secure your investment
6. Evaluation tools that analyze the efficacy of the strategies and portfolio performance

Top 5 Cryptocurrency Asset Management Tools Provider

We have found that asset management tools and services provided by platforms vary. Depending on the approach and the business model they use, these tools may have several features or be the best of their type. Here, we provide the top 5 asset management tools platform and will discuss each briefly.

1. HaasOnline: Used for crypto trading bots, and the traders can develop their bots together with scalping trading and arbitrage trading.
2. Koinly: The platform’s primary focus is on tax reporting for accounting purposes.
3. Finestel: It is a white-label crypto asset management software in the industry. This software was primarily designed for professional crypto asset managers and traders to manage and maintain their community of clients’ crypto portfolios, investments, and trades using only one dashboard and powered by Finesel’s robust copy trading.
4. Altrady: This platform is used for automatic market analysis, and buying and selling cryptocurrencies are also possible.
5. BitGo: Covering institutional clients with liquidity and security solutions; lending and borrowing services are available.

Factors to Consider When Choosing an Asset Management Tool

Every person may have different perspectives and goals when choosing an asset management tool. Furthermore, we have discussed different asset management tools and specified what you expect from such platforms. However, you may still want to know what variables make a good asset management tool, so we provided key factors for further analysis.

First, you should determine your management needs and then inspect whether your chosen platform satisfies those needs. Then, the simplicity of using these platforms must be scrutinized since these tools are intrinsically sophisticated. In addition, assess if the tools the platform provides are prone to changes due to data modification and analyze the scalability of these tools. Also, consider how well the tool’s accuracy changes as a result of integration with your data sources and your system. Finally, assess the fee structure and pricing of using asset management tools.

Conclusion

Understanding and choosing the right crypto asset management tool is vital as your funds and investments are in their control. In this post, we started to explain what is a crypto asset and how it differs from liabilities. Afterwards, we provided the readers with the definition of what is a crypto asset management and how it is different from fund management or hedge fund. Then, we advised the readers on the ways to identify who a crypto asset manager is and provided a guideline for choosing a reputable one.

The available definitions on the internet are overloaded, and a trader or asset manager may find them misleading. Hence, we decided to let the readers know in what ways portfolio management and asset management are different. Finally, the features and the platforms that offer asset management tools were analyzed and listed.

FAQ

Is a portfolio manager the same as an asset manager?

Portfolio managers and asset managers are not the same. A portfolio manager’s primary focus is on managing investment portfolios like asset allocation, and they work within specific asset classes. On the other hand, asset managers have a broader role, and the asset classes they manage include bonds, stocks, or infrastructure.

How Much Does Asset Management Software Cost?

The cost of asset management software is varied, and it depends on many factors. Some of these factors are the number of assets being managed, the size of the organization, and the client’s investment amount. The pricing models are of two kinds: subscription-based pricing and enterprise licensing. In general, the costs start with a minimum of $300 and a maximum of $250,000.

What are the tools for portfolio analysis?

There are numerous tools and services used for portfolio analysis. If we want to categorize them, they are tools for data analysis, visualization, portfolio analysis, and portfolio management tools. Also, there are some tools used for fundamental analysis, like risk management, financial analysis, and performance attribution. Finally, some traders may use Microsoft Excel and Google Sheets for portfolio analysis.

What Is Asset Allocation?

Simply put, asset allocation is the practice of implementing your investment strategy and analyzing the risk/reward of each asset. The strategy is designed to balance risk and return within investments across multiple asset classes. The investor’s risk tolerance, goals, and time frame are the factors asset managers consider when implementing investment strategies.

What is the difference between asset management and wealth management?

Wealth management and asset management are two similar concepts with different uses. Wealth management is a comprehensive approach to managing an individual’s overall funds. It includes managing tangible assets like real estate properties, tax advisory, and insurance. However, asset management involves maximizing investment returns, managing investment portfolios, and asset allocation. Asset managers generally work with individuals and management firms, but wealth managers work with private banks and larger financial institutions.