If there’s one thing we’re learning in 2022 is that the crypto market is still young and facing intense volatility.
And yes, I know, trying to to understand how cryptocurrencies work can be complicated and time-consuming at best. It doesn’t help either that the language can sound like over the top jargon most of the time. But don’t let that deter you.
Whether you’re a newcomer or someone who finally wants to crack the mystical market cryptocurrencies, perhaps it’s time to consider turning to a robo-advisor and automate your digital asset investments.
That way you won’t have to spend hours researching and tracking the crypto market, and you’ll be able to invest in the cryptocurrency market with minimal effort.
But what are robo-advisors, and what do they do? Here’s an overview that can help you decide whether a robo-advisor might be a good fit for your goals and the top platforms that you should be looking at in 2022.
What Is A Robo-Advisor
Simply put, a robo-advisor is an automated investment service that relies on computer algorithms and complex software to manage financial portfolios.
Since being developed over a decade ago, these types of automated advisors have become increasingly popular, in particular with novice investors. That isn’t to say that more experienced investors can’t reap the benefits of using this service as well.
Robo-advisors are a great option for those of us who don’t have the time to keep up with the markets or simply don’t want the anxiety of managing our own portfolios.
There are many benefits in choosing an automated advisor over a traditional financial advisor. Let’s look at how this all works.
When you sign up for a robo-advisor, you’ll be asked to complete a questionnaire to assess your personal preferences such as your financial goals, time horizon, and risk tolerance. Based on this data, robo-advisors weigh your personal preferences against unpredictable market forces, like volatility and asset class performance, to recommend the diversified portfolio strategy that better meets your needs.
From here, you can set it and forget it, so that your funds will be managed and rebalanced automatically by your robot advisor.
Choosing a robot advisor can be a good move to invest in the stock market with minimal effort and peace of mind. They’re also typically cheaper than traditional advisors as they charge less fees, including the minimum initial deposit.
What Is a Crypto Robo-Advisor
A crypto robo-advisor is an online platform that will manage your crypto investments automatically. Instead of a human financial advisor, advice specializing in cryptocurrencies and non-fungible tokens (NFTs) is being generated by algorithms so that your financial goals are reached while you get the peace of mind that comes from knowing your digital assets work hard for you.
Just like with the robo advisor strategy we described earlier, a crypto robo-advisor takes an algorithm-driven approach to assess a user’s preferences, risks, and goals, and creates a crypto investment portfolio in accordance with that information.
Automated crypto advisors will also provide services such as portfolio rebalancing and tax-strategy products, depending on where you live, as well as having recommendations on which digital assets you might want to buy, hold, or sell.
The crypto market can be especially daunting for newcomers, so choosing a crypto advisor that will manage your portfolio automatically and that lets you track your investments without the time and effort that it takes to do it all by yourself, can be a great advantage.
How Do Crypto Robo-Advisors Work
Based on advanced algorithms and automation, robo advisors are an investment platform that is both convenient and affordable. Here’s how a typical automated advisor works:
Create an account and deposit money
The first step in setting up a crypto robo portfolio is opening an account and depositing a cryptocurrency. The minimum amount required to open investment accounts will vary depending on the platform you’ve chosen.
Assess your investor profile
Once you’ve opened your account, you’ll likely be asked to complete a questionnaire so that the crypto robo-advisor is able to establish your investing profile based on parameters such as financial objectives, timeframe and risk preferences.
Your robo-advisor creates a crypto portfolio
Based on your preferences, your robo-advisor will allocate you to a suitable basket of investments, made up of different digital assets.
Enjoy your portfolio being automatically managed
Once your portfolio is set, the robo-advisor takes care of the rest, periodically rebalancing and optimizing your investments using different algorithms.
Withdraw money whenever you choose
This may depend on the robo-advisor you’ve chosen, but most platforms will let you access and withdraw funds at any time. This flexibility is certainly a major plus when compared to other platforms in traditional finance.
5 Best Crypto Robo-Advisors In 2022
Betterment
Betterment is one of the largest robo-advisors in the world, managing $26.8 billion in assets for 615,000 individual clients.
The digital wealth management platform has recently announced that it would be offering a robo-advisor targeted at crypto offerings.
Crypto Investing by Betterment offers four themed, customizable portfolios that let users invest in a curated selection of digital assets:
- Universe: Features a diversified collection of cryptocurrencies, including established coins like Bitcoin and Ethereum, offering broad exposure across the crypto landscape, including decentralized finance.
- Sustainable: Focuses on cryptocurrencies that transact sustainably or on networks with a path to sustainability, like the newly transitioned Proof of Stake Ethereum.
- Metaverse: Dedicated cryptocurrency projects currently building a network of immersive digital experiences and new approaches to digital commerce, including real estate, gaming, entertainment, and more.
- Decentralized Finance: Provides exposure to assets leveraging blockchain technology to offer financial services without the need for banks or other centralized institutions.
The platform is one of the easiest ways to get into crypto using robust portfolios designed by expert investors. Beyond crypto portfolio management, can also access in-depth information, including an educational resource center, a bi-weekly crypto newsletter, and regular commentary from our Betterment experts.
However, interested users should note that there is a 1% annual advisory fee plus trading expenses, so this might not be the most cost-effective investment method.
Shrimpy Advisory
Shrimpy Advisory is a brand new cryptocurrency robo advisor that helps investors obtain exposure to different crypto sectors through uniquely themed asset baskets. As an SEC-registered robo advisor, Shrimpy Advisory says its mission is to facilitate digital asset investing for beginners with limited experience in the crypto market.
Shrimpy Advisory offers various crypto baskets with preset allocations of assets, ranging from blue chip coins like Bitcoin and Ethereum to some of the newer and more unique projects in sectors such as DeFi, Layer 1, Metaverse, and more.
All you have to do is set up an account, assess your risk tolerance and investment timeline with a short quiz, and deposit funds to your account - Shrimpy Advisory does all the rest for you. The platforms says that is constantly monitors the market and updates baskets and allocations according to shifts in market trends.
If you're looking for a hassle-free advisor that doesn't require you to micromanage your investments and keep daily tabs on your portfolio, Shrimpy might be an option worth considering as they do all the buying, selling, and research so you can relax and enjoy the things that matter most to you.
M1 Finance
M1 Finance is a leading personal finance platform with more than $5 billion in assets, offering its clients the possibility to invest in crypto assets via a robo-advisor.
According to the company, the goal is to remove some of the barriers to investing by automating certain aspects of investing in crypto like fund allocation, risk management, and recurring investments.
M1 offers up to 10 coins, including (BTC), Ethereum (ETH), and other large-cap liquid crypto assets.
One of M1 Finance’s key offerings is pie-based investing strategy, which essentially allows users to create a portfolio of “Pies” in which each asset and its exposure percentage is represented as a slice on a pie graph. The crypto robo-advisor service is backed by algorithmic software that can automatically balance each portion of the pie, depending on the user’s initial investment strategy or asset allocations.
Here’s how the company explains its approach in more detail:
Creating custom and expert-built crypto Pies
Users choose a crypto portfolio that fits their financial goals and risk tolerance. You can build custom crypto Pies or use Expert Pies, which are pre-built using thematic strategies such as DeFi, Web3, and large-cap crypto.
Setting target allocation based on your strategy
Decide what percentage allocation makes sense for your overall portfolio based on your investment thesis. Then, set target allocations for each crypto asset and change them as needed over time.
Staying aligned with dynamic rebalancing
Some major cryptocurrencies have seen great volatility as of late, leading your initial target allocations may shift. Dynamic rebalancing reallocates your funds with every recurring deposit and investment to realign your portfolio with your financial goals.
Setting up an investing schedule using recurring deposits.
Recurring deposits make it easier to automate how much money you put into your account. If you follow long-term investing strategies like dollar-cost averaging, recurring deposits help you consistently invest in your chosen crypto assets.
Commission-free investing
AM1 is commission-free. You’ll be able to set and automate your investment strategies the same way you currently do with stocks and ETFs on M1, but you’ll hold crypto assets in a separate, secure custodial wallet powered by Apex Crypto. Your crypto assets will not be loaned or pledged.
Users should bear in mind that M1 is currently only available within the U.S.
Wealthfront
Wealthfront is a robo-advisor firm with over $25 billion assets under management, and one of the top-performing digital wealth management platforms in the world.
The firm offers options for crypto exposure with two investment options - the Grayscale Bitcoin Trust (GBTC) and the Grayscale Ethereum Trust (ETHE).
Those products are similar to exchange-traded funds (ETFs) and give users exposure to the price movement of Bitcoin and Ethereum, respectively.
The trusts are meant to provide “indirect exposure to cryptocurrency”, but investors opting to purchase units of the trusts won’t be able to allocate more than 10% of their portfolio.
Understanding the nature of the crypto market and the potential for high volatility, Wealthfront offers a rebalancing option in case the value of the crypto trusts suddenly rises or falls and the percentage of the digital assets deviates five percentage points from the investor’s target.
This robo-advisor offers a competitive 0.25% management fee and free management of balances under $5000.
CryptoSimple
CryptoSimple is a robo advisor-based crypto investing solution that aims to be simple, smart, and secure.
To ensure that the robo-advisor determines the optimal risk profile for you, you’ll be asked to answer a few questions such as your crypto expertise, a risk assessment, and your investing goals.
CryptoSimple will then help you set your investment goals and stick to the path that will help you reach them. Users may also follow tips and advice from the handy robo-advisor or follow the information that is offered by the financial advisors who monitor the markets in real-time. CryptoSimple says that it wants to help users sit back and enjoy their investments on autopilot mode.
The platform offers three investment baskets:
- Conservative: A portfolio biased toward stable coins (90%), while only 10% is invested in volatile coins.
- Balanced: A portfolio of stable cryptocurrencies (65%) and volatile cryptocurrencies (35%), designed for those seeking a balance of risk and reward.
- Growth: A portfolio with relatively higher than average risk in order to provide greater potential gains. 65% of the portfolio is allocated to volatile assets, while only 35% is allocated to stable ones.
CryptoSimple is regulated as a Digital Asset Service Provider (DASP) by the EU’s leading financial authority (AMF).
