Crypto investors are champing at the Bitcoin. 

The world’s largest cryptocurrency is flirting with the almighty $100,000 record and is expected to soar as a new pro-crypto presidential administration settles into the Oval Office. All the hoopla has asset managers in a frenzy to launch new and innovative digital asset products. Crypto ETFs have pulled in billions since the election, and new products that deal in lesser-known currencies, or even option calls, are available or in the works. While the offerings give investors unprecedented access, some are leaning into riskier and more speculative strategies. They’re also catering to crypto’s “degen” crowd — a self-proclaimed group of degenerate traders that were born out of the meme-stock era.

“The ETF industry is using this as an opportunity to throw spaghetti at the wall,” said Roxanna Islam, head of research at VettaFi. “I expect to see more actively-managed, leveraged, and options strategies over the next few months.”

Just Speculating

Issuers have now applied to set up funds that track Solana, XRP and Litecoin, and the next generation of crypto ETFs could focus on a whole host of digital tokens, sometimes using leveraging or quant strategies. “ETF sponsors will push for any new product to get approved by the SEC so they can try to gather assets and market share,” said Brian Spinelli, Co-CIO at Halbert Hargrove. “It’s essentially a guess on investor behavior.” 

Some of the most popular ones include commodity futures pegged to crypto that earn yields, as well as others that offer downside protection, according to Bloomberg. “I also suspect that the more speculative the product, the higher the probability of investor disappointment,” Spinelli told the Daily Upside.

While there seems to be a slew of new products in the works, not all of them are geared toward retail investors. Leveraged products will most likely be utilized by institutions and experienced day traders — degen or not. “Even if we see the SEC relax its guidelines, certain brokerage firms still have restrictions,” Islam said.

Never Pay Retail. Still, investors in the US poured $6.5 billion into spot Bitcoin funds in November alone, as the price rallied roughly 45% to touch a record $99,000. The month-long bull run resulted in just $411 million of outflows last month, according to Cointelegraph. The data also found:

• BlackRock’s IBIT brought in $5.6 billion of investments in November, accounting for almost 87% of the total monthly inflows. 
• Other prominent firms also rode the crypto wave, like Fidelity’s Wise Origin Bitcoin Fund that topped $962 million.
• Continued inflows from institutions and private investors are expected to support the run. “Retail investors still face roadblocks,” Islam said.

After a lengthy coma, the IPO market may be coming around, and Morgan Stanley wants to be there when it wakes up.

As signs point to a initial public offering rebound in 2025, the investment bank is courting employees at start-up companies that are slated to go public. Last month, Morgan Stanley at Work, the bank’s workplace benefits unit, announced a partnership with the recordkeeping software firm Carta that will help the brokerage attract new clients. Morgan Stanley’s advisory unit is hoping to form new relationships with Carta’s clientele that are mostly wealthy executives and early investors at startup companies.

“We see signs of life in the IPO market,” said Scott Whatley, head of Morgan Stanley at Work. “We see tremendous opportunity for wealth management in the need for advice and specialized services.”

Teamwork Makes the Dream Work

While Morgan Stanley at Work already manages ownership records for private companies, Carta works with more than 45,000 startups that have a collective 1 million employees. Nearly 2,000 of those companies are already preparing for an IPO, Carta said in a statement. 

“It used to be that companies would go public after three or four years,”  Whatley told The Daily Upside, adding that private companies today are now 10 times larger than they were 20 years ago. That means much larger payouts for early-stage employees.

Need a 401(k)? The strategy is quite common as Goldman Sachs, JPMorgan, Bank of America, and Citi are all increasingly trying to utilize their investment banking relationships as referral opportunities for their wealth units, said Chayce Horton, Cerulli senior analyst. One of the top ways clients find an advisor is through their workplace’s retirement plan offering, he added.

This partnership will also help streamline the transition of these companies to public markets and introduce Morgan Stanley to a new crop of investors, said Vijay Raghavan, Forrester senior analyst. “The engine of growth for wealth management firms is client acquisition and the ideal ones to target are young, wealthy clients with a long path towards retirement,” he told The Daily Upside.

Call it a Comeback. With inflation down, major indexes riding high, and the Federal Reserve lowering interest rates, IPOs are poised to make a modest return next year. And that spells good news for wealth managers. According to data from Ernst & Young, IPOs may be on the rebound:

• So far this year, there has been a measured recovery for the IPO market with 121 launches raising more than $27 billion as of September.
• In 2021, there were 416 launches that raised more than $155 billion in proceeds. 
• Across 2022 and 2023, however, there were only 217 combined IPOs raising just under $31 billion.

“IPOs are liquidity events at heart, and those liquidity events are vital for unlocking private wealth,” Horton said. “A greater flow of IPOs will prove to be a tailwind.”

Sheena Gray, CEO of the Association of African American Financial Advisors, had an “aha moment” two years ago when her association conducted a workshop with the National Football League. Many of the athletes were high earners, but had not been introduced to advice early in their careers. It led to costly financial mistakes.

It was just another example of how the advice industry is still grappling to recruit more Black professionals and ultimately serve more Black clients. “We need to dig deeper and not just focus on underserved communities,” Gray told The Daily Upside. “Even Black executives may not understand the wealth they’ve accumulated and what to do next with it.” 

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