Investment risk evaluation firm Riskalyze is partnering with crypto education and access provider Onramp Invest to bring the tech firm's risk metrics to cryptocurrencies. It is Onramp’s first integration with a risk evaluation firm, and Riskalyze joins Prime Trust, Gemini, Advyzon, CFBenchmarks and CoinAPI as Onramp integration partners.
Riskalyze will be adding “a quantitative, objective approach” to the risk of investing in digital assets, said Onramp CEO Tyrone Ross Jr., in a statement. “Advisors and investors need to educate before they allocate [to cryptoassets] and understanding risk is a major part of that.”
While crypto is a high-risk asset, Riskalyze’s toolkit allows advisors to see how crypto interacts with other areas of a client’s portfolio, said Riskalyze CEO Aaron Klein. “Every crypto coin is different, but we feed the same data points for crypto return and volatility into the risk model as we do every other security Riskalyze covers." Bitcoin is currently the only cryptoasset supported by Riskalyze.
"Bitcoin is definitely Risk 99," the highest level of risk for an investable asset, Klein added, "but the really interesting analysis is how it correlates and provides diversification to other asset classes in a specific client’s portfolio.”
The firm needs at least six months of data to evaluate an individual security’s risk, Klein said. The asset will also be tagged with an indicator that it is “young.”
Risk evaluation has been an important consideration for advisors lately, even as risk measurement specialists have been purchased by wealth management platform providers. Orion Advisor Services bought HiddenLevers earlier this year and deployed “behavioral finance workflows” into a feature called a 3D Risk Profile. Morningstar also launched a new risk evaluation feature called the Risk Ecosystem, incorporating elements of its FinaMetrica software acquired in 2020. Meanwhile, Riskalyze has added 10,000 financial advisors to its platform during 2021.
Riskalyze has even gone so far as to declare the 2020s a “risk-first decade,” according to Klein. Part of that vision is measuring the risk presented by cryptocurrencies, he said. “We’re incredibly excited to help infuse the Risk Number into what Onramp is building.”