Bitcoin and cryptocurrencies are poised for mainstream acceptance, as evidenced by record inflows into US spot exchange-traded funds (ETFs), with Goldman Sachs holding more crypto ETF shares issued by BlackRock than any other entity and corporate treasuries from Strategy to Bitmine investing in digital assets.
Nonetheless, a recent Bank of America survey reveals that three-quarters of global fund managers remain adamantly reluctant to engage with digital assets.
Max Gokhman, Deputy Chief Investment Officer for Franklin Templeton Investment Solutions, asserts that this contradiction isn’t fueled by regulatory uncertainties or operational challenges, as those issues have largely been resolved.
In a discussion with CryptoSlate, Gokhman highlighted that the skewed perceptions are rooted in fear, misconceptions, and the industry’s difficulty in letting go of outdated beliefs about legitimate investments.
Having observed traditional finance navigate the digital asset evolution, Gokhman remarked:
“The biggest reason is it takes a while for an established industry to realize that they’re falling behind. There’s this fear of the unknown that exists.”
The stewardship paradox
Fund managers take pride in their fiduciary duty, but this instinct has led to a paradox: the aim to safeguard client assets often hinders access to opportunities that their clients increasingly seek.
Gokhman states:
“Part of being a good steward is being aware of what your clients want. Clients from retail to institutional level are more interested in digital assets, but they’re finding that their investment managers are not actually there with solutions.”
Resistance arises from lingering misconceptions. One belief is that the space is purely hyper-speculative and lacks intrinsic value, while another is the absence of skilled personnel to develop legitimate investment solutions using digital assets.
The memecoin trap
When Gokhman encounters doubtful colleagues, the dialogue often follows a familiar pattern. Traditional finance advocates reference memecoins to illustrate the entire crypto landscape, exposing what he describes as a surface-level understanding.
Just like equities range from stable blue-chip dividends to speculative biotech stocks, digital assets vary from established protocols generating genuine revenue to speculative tokens.
His response has become instinctive:
“Because you invest in equities, does that mean you’re only buying pink sheet penny stocks? High-yield debt has plenty of companies that most rational investors wouldn’t touch with a ten-foot pole. Most asset managers will tell you they own emerging market equities and distressed debt. That’s a key asset class for them.”
Gokhman emphasizes that the skepticism is selective. Managers readily hold Venezuelan bonds, which have defaulted repeatedly, yet hesitate to invest in Bitcoin, which has maintained its integrity for 15 years.
As fund managers debate the legitimacy of crypto, the market has evolved significantly. The data Gokhman cited undermines the retail narrative: 89% of Bitcoin transactions on exchanges surpass $100,000. He pointed out:
“That’s not retail money. The market is becoming more institutionalized.”
Educational challenge
Franklin Templeton’s strategy involves a three-tier campaign aimed at central bankers, institutional intermediaries, and retail investors. The middle tier, crucial for success, includes wirehouses and platform owners who oversee access to millions yet often remain unaware of client demands.
Gokhman queries these players about whether they’ve inquired if their clients are interested in crypto. He adds:
“They may have a Coinbase account where they have most of their wealth. You’re just not capturing that.”
Traditional advisors frequently discover wealth fragmented across platforms, with professionally managed portfolios lacking the digital assets clients have accumulated independently.
Franklin Templeton’s innovation lies in translation: articulating blockchain concepts in terms familiar to traditional finance. When assessing Solana, they refrain from using revolutionary language and instead focus on calculating discounted cash flows.
Gokhman elaborated:
“If you have something like Solana where actual fees are being paid on every transaction, we can project the growth of those transactions. Those are future cash flows. We can discount them back to the present.”
This method demystifies digital assets by applying accessible analytical frameworks that any investor with basic valuation skills can comprehend.
It all comes to yield
As Federal Reserve rate cuts loom, Gokhman identifies opportunity. Traditional income sources are yielding diminishing returns as institutions face increasing pressure to generate revenue, and crypto presents a viable alternative.
He states:
“Everyone needs income. Staking is one clear way to do it. When people express concern about [crypto] being a scam, I ask them if they worry about the government canceling all debt, because I’ve seen that happen.”
Recent SEC guidance on liquid staking signifies a potential turning point. For the first time, regulated products may offer staking yields without necessitating direct crypto ownership.
If crypto ETFs enabling staking receive approval, Gokhman predicts that resistance will not be sustainable. He surmised:
“When we can provide the yield, I believe it will drive further adoption.”
This transformation may occur abruptly. Institutional adoption typically follows a pattern of enduring skepticism until competitive pressures prompt a mass shift.
The significant divide remains between the 75% of fund managers clinging to familiar paradigms and an expanding coalition recognizing that effective client service necessitates embracing technological advancements.
The pivotal question isn’t whether this divide will be bridged, as economic pressures assure eventual adoption. The critical question is which managers will take the lead and which will struggle to keep pace.
