Three ways wealth managers can profit from cryptos

Arbitrage, interest-bearing accounts, and business referral commissions.
Image: REUTERS/Dado Ruvic

Financial advisors are leading a new wave of crypto adoption. What was once anecdotal evidence has now been backed up by surveys: “More than half of [financial] advisors are receiving questions from their clients about cryptocurrencies,” according to Michael Sonnenshein, CEO of bitcoin investment company Grayscale.

This is echoed by Jon Ovadia, CEO of SA-based crypto firm Ovex: “Wealth managers are starting to enquire about owning bitcoin and the possibility of earning passive income by arbitraging cryptocurrencies. It is no longer an exotic fringe addition to the world of investments. They are being forced by their clients to investigate cryptocurrencies. I think it’s fair to say that no responsible wealth manager is not at the very least looking at cryptos, if not actually recommending them to clients.”

While cryptocurrencies such as bitcoin are notoriously volatile, Ovex offers three ways to profit from cryptos regardless of market conditions.

  1. Crypto arbitrage, which is a proven way of making profits in bull or bear markets. It involves profiting from price differences in crypto assets in different markets. For example, bitcoin can frequently be bought overseas at prices 1-4% below prices quoted on SA exchanges. Ovex has automated and simplified this process using a stablecoin called True USD (TUSD), which is a crypto-like asset backed 1:1 by the US dollar. TUSD can typically be purchased overseas at a discount to what the US dollar sells for in SA. This discount, or arbitrage gap, tends to mirror the arbitrage premium for bitcoin on local exchanges. Arbitrage trading is designed to avoid risk as much as possible by being exposed to market forces for as brief a period as possible. The faster the trade is executed, the quicker the arbitrage profit is locked in (find out more about that here).
  2. Interest accounts, paying up to 20% a year for clients. Ovex offers clients an interest account paying around 4% a year on bitcoin and between 9% and 10% a year on stablecoins such as TUSD, Tether USD (USDT) and Binance USD (BUSD). For clients depositing more than R500 000, Ovex will quote you a premium rate of up to 20% (find out more about that here).
  3. Referral programme: Ovex has now introduced a referral programme, adding another way to earn passive income from crypto arbitrage. The programme pays out R1 000 for each new client introduced for the first 10 clients, and then scaling up from there. This is particularly attractive for wealth managers representing large numbers of clients.

Ovex referral programme

Source: Ovex

“We now have three ways in which wealth managers can earn a passive source of income, without having to make bets on which way the crypto market is going to go,” says Ovadia.

“The crypto market has great opportunities for profit, but as we have seen in the last few months, it is extremely volatile, which is why we have developed a number of different passive sources of income that are not dependent on which direction the market is headed.”

Ovadia explains that Ovex’s interest accounts offering returns of up to 20% a year are starting to attract attention from wealth managers with large funds under management. These returns are well above those offered by traditional financial institutions and are in part a consequence of the risks associated with cryptos, but are also a benefit of the technology embedded in the blockchain on which cryptos reside. Ovex generates interest not just from ‘staking’ (earning rewards for putting cryptos to work in the blockchain) but also by identifying different crypto arbitrage opportunities in both the spot and futures markets.

Decentralised finance or DeFi, an outgrowth of blockchain technology, has spawned an array of financial products and solutions that threaten to eat into the market share of traditional financial service providers, which are centralised and rely on intermediaries who add fees and inefficiencies to the system. DeFi is a decentralised network, making them open to anyone to use, rather than going through intermediaries like banks or brokerages. In brief, DeFi applications built on blockchains such as Ethereum allow users to lend, borrow and earn interest on crypto assets. Ovex is positioning itself as a leader in this new wave of financial product development.

“Big wealth managers are starting to see how cryptos can supplement their existing financial offerings,” says Ovadia. “Our referral programme will help in generating another passive source of income at a time when financial risks in virtually all markets are on the rise.”

Brought to you by Ovex.

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