The Gap in Crypto Assets: Why Traditional Forces on Wall Street Are Reluctant to Enter

Written by: Gino Matos, CryptoSlate

Compiled by: Shaw Golden Finance

Bitcoin and cryptocurrencies seem poised for mainstream acceptance, with inflows into U.S. spot exchange-traded funds (ETFs) reaching new highs. Goldman Sachs holds more shares of the cryptocurrency ETF issued by BlackRock than any other institution, and corporate finance departments from Strategy to Bitmine are also embracing digital assets.

However, a recent survey by a U.S. bank shows that three-quarters of global fund managers still firmly refuse to get involved in digital assets.

Max Gokhman, Deputy Chief Investment Officer at Franklin Templeton, stated that these seemingly contradictory data do not stem from regulatory uncertainty or operational complexity, as these obstacles have largely been resolved.

In an interview, Gokman stated that this imbalanced data stems from fear, misunderstanding, and the industry's deep-rooted belief in legitimate investment that is difficult to relinquish.

Gekman has long been focused on how traditional finance responds to the digital asset revolution. He pointed out:

"The biggest reason is that a mature industry often takes time to realize that it is falling behind. This fear of the unknown has always existed."

Management Paradox

Fund managers take pride in fulfilling their fiduciary duties, but this protective mindset creates a paradox: the desire to safeguard client assets prevents them from accessing the increasingly sought-after investment opportunities by clients.

According to Geheman:

"One aspect of effective asset management is understanding the needs of clients. From individual clients to institutional clients, there is an increasing interest in digital assets, but they find that their investment managers are not actually providing relevant solutions."

This resistance stems from some deep-rooted misunderstandings. One viewpoint holds that it is entirely over-speculation and has no value; another viewpoint believes that there is a lack of qualified personnel to utilize digital assets to create legitimate investment solutions.

Meme Coin Trap

When Gokman encounters skeptical colleagues, the conversation always follows a predictable pattern. Seasoned professionals in traditional finance tend to view Meme coins as representative of the entire cryptocurrency ecosystem, which exposes what he calls a superficial understanding.

Just as the stock market encompasses everything from blue-chip dividend stocks to speculative biotechnology stocks, digital assets range from mature protocols that generate real returns to purely speculative tokens.

His reaction has become very natural.

"Just because you invest in stocks, does that mean you only buy those low-priced stocks traded on the pink sheets? There are many companies in high-yield bonds that most rational investors would avoid. Most asset managers will tell you that they hold emerging market stocks and distressed debt. This is a key asset class for them."

Gehman emphasized that this skepticism is selective. Fund managers feel reassured by Venezuelan bonds, which have defaulted multiple times, yet they hesitate when it comes to Bitcoin, which has never defaulted in 15 years.

Although fund managers are still debating the legitimacy of cryptocurrencies, the market has quietly changed. The data cited by Gokhman debunks the narrative of retail dominance: 89% of the trading volume in Bitcoin transactions on exchanges exceeds $100,000. He emphasized:

"That is not retail money. The market is becoming increasingly institutionalized."

Educational Challenges

Franklin Templeton's response measures include a three-tiered promotional campaign targeting central bank officials, institutional intermediaries, and retail investors. The crucial middle layer consists of large brokerage firms and platform owners who control channels to millions of customers but are completely unaware of customer needs.

Gokman asked these players if they had inquired with clients whether they wanted cryptocurrency. He added:

"They may have an account on Coinbase, storing most of their wealth there. And you haven't grasped these situations at all."

Traditional advisors often find that their clients' wealth is spread across multiple platforms, and the portfolios managed by professionals do not include the digital assets accumulated by the clients themselves.

Franklin Templeton's breakthrough lies in the interpretation: expressing blockchain concepts in traditional financial language. When analyzing Solana, they did not invoke revolutionary rhetoric but instead calculated discounted cash flows.

Gehman explained:

"If every transaction has to actually pay a fee like Solana, we can predict the growth of these transactions. These are the cash flows of the future. We can discount them to the present."

This method unveils the mystery of digital assets by employing a familiar analytical framework that can be understood by any investor who has received basic valuation training.

It all comes down to profit.

As the Federal Reserve's interest rate cuts approach, Gokman sees an opportunity. The returns from traditional sources of income are continuously declining, while institutions are facing increasing pressure to generate revenue, and cryptocurrencies can provide an alternative.

According to him:

"Everyone needs an income. Staking is a clear way to earn income. When someone tells me they are worried that all of this (cryptocurrency) is a scam, have you ever thought about whether the government might directly cancel all debts? Because I have experienced this situation."

The recent guidelines from the U.S. Securities and Exchange Commission (SEC) regarding liquid staking may be a turning point. This is the first time that regulated products can offer staking rewards without directly holding cryptocurrencies.

Gokman predicts that if the cryptocurrency ETF supporting staking is approved, this resistance will not last indefinitely. He predicts:

"When we are able to provide returns, I believe this will drive more adoption."

This transition may accelerate suddenly. Institutional adoption typically follows this pattern: there is a persistent skepticism until competitive pressures force large-scale action.

A huge cryptocurrency gap still exists between the 75% of fund managers who adhere to traditional frameworks and the growing number who recognize that customer service needs to embrace technological change.

The issue is not whether this gap will narrow, as economic pressures will ultimately drive all parties to accept it. The question is which managers will lead the trend and which will hurriedly follow.