Economic education

Bitcoin for everyone – Are crypto funds the solution?

by admin .

Interest in Bitcoin, crypto currencies and financial products that map or invest in them continues to grow. In many places, on the other hand, the voices after regulation and consumer protection regarding crypto currencies are becoming louder and louder. Regulated crypto funds can certainly also lower the entry hurdle for newcomers.

BTC-ECHO has already reported several times on regulated crypto funds. These include Blockwall, Postera and BITREAL.

Status quo of the Bitcoin formula

If you take a look behind the review of onlinebetrug, however, you will see that these Bitcoin formula funds are far from suitable for the masses:

Minimum investment unattainable for small investors
The Postera Fund – Crypto 1 has the lowest entry hurdle with a minimum investment of 50.000 Euro. At first glance, EUR 50,000 may not sound like a considerable sum. If, however, one considers the fact that an investment portfolio should always have sufficient risk diversification, then it is no longer a question of a small investment capital, which a potential investor should hold. Based on the minimum deposit, these regulated crypto funds are primarily aimed at institutional investors.

Low competition – high fees
The market is only responding to the demand for regulated crypto funds. As a result, there are still too few of them and there is no competition. As a result, there is little or no competition and the companies can afford high management fees and closing fees. A closer look at the Postera Fund – Crypto 1 reveals that an issue premium of three percent compared to equity funds does not attract too much attention. Even a management fee of 1.1 percent does not yet have a hard impact. What is more important, however, is a performance fee of 20 percent, which is deducted after a hurdle rate of 6 percent and a new all-time high (high water mark). Here, the company actually diverts one fifth of its profits.

Existing funds uninteresting for private Bitcoin trader investors

For cost reasons and due to high minimum Bitcoin trader investments, the existing crypto funds are still far from becoming interesting for a private investor: The Postera Fund – Crypto 1, as well as the other mentioned funds, are specifically designed as alternative investment funds (special funds) for institutional investors and are not distributed to private investors in the first place.

So let us come back to the detailed question of crypto funds, which are intended to protect consumers through existing regulation. In principle it is to be clarified here, how one can produce consumer protection at all.

Consumer protection – how is it really done?
Many regulations want to prevent consumers from losing money through speculative transactions. However, if you look at the big picture, you have to realize that returns are generated by assuming risk or volatility. Consumer protection does not mean protecting the investor from returns. In order to be able to earn a return on investment in the financial or crypto markets, one must practice assuming a certain risk. One can learn this only, while one acquires appropriate products and grows at it.

How can we protect the consumer? In my opinion, three essential steps are needed here:

Economic education
The first step must be to provide clear and differentiated information and general economic education. Regulatory authorities should refrain from demonising the blockchain or crypto currencies as a whole or “warning” consumers against them and thus preventing them from dealing with them. Rather, they should make well-founded sources of knowledge available – this can also happen in the form of links to reputable and tested sources. Another possibility is to make knowledge available in a simple language, such as the Bundesbank does on various topics. This would also help to avoid or reduce information asymmetries that are already being complained about. This would make it easier to get to grips with a particular topic. Consumers can judge better whether they would like to carry the respective risk and invest money or not, after they have obtained an overview of the material.

Availability of entry-level products
Once a potential investor has decided on an investment, the second step should be to provide products that are suitable for beginners. These products must meet a number of conditions.