While demand for crypto is rising, agencies are still lagging behind, says Max Gokman of Franklin Templeton.

Max Goffman of Franklin Templeton explained what investment companies are doing to meet the growing demand for clients for crypto assets.

As the digital asset space matures, institutional interest is growing, particularly as client demand increases. However, most financial institutions are still behind in terms of this asset class, says Max Gokhman, deputy CIO of CFA at Franklin Templeton Investment Solutions. In an interview with Crypto.News, Gokhman explained what the investor giants are doing to meet the demand from clients who want to invest in Crypto assets.

crypto.news: Are you seeing growing demand for digital assets among clients?

Max Gokhman: It depends on the client segment. If you’re talking about large institutional investors, sovereign wealth funds, and pensions, the demand is still minimal. When we talk about individual investors, demand is increasing.

Interestingly, there is growing interest from traditional investors, reflected in the flow to a $175 billion digital asset ETF. There is also demand from crypto-borns who are trying to break it down from pure crypto-holdings into a more balanced portfolio.

Next, there will be the midfield, the family office and smaller donations. Many of them see an increase in demand for digital assets and want to integrate them into a wider portfolio.

So, one of the things we’ve been thinking about is how to build the right product for each group. For large institutions, it is using digital assets without introducing excessive volatility. For retail investors, it is expanding digital assets to traditional portfolios with a risk-aware framework. Also, for family offices and donations, it is about how to treat less liquid assets like private equity and integrating them into a total portfolio alongside more traditional open market investments.

It’s a changing picture, and I hope that demand will continue to increase, especially as regulations become more clear.

CN: What are some examples of products you are developing for clients who have intervened with cryptographically?

MG: One of the products we have already launched is a suite of asset allocation models that incorporate digital assets along with traditional investments.

We have built a portfolio with digital asset allocations ranging from 1% to 6%. This is 1% for conservative positions and 6% for extremely offensive positions. For example, its aggressive model is 94% of stocks and 6% of digital assets.

The rationale is that in asset allocation, we do not want a single asset class to account for more than a fifth of the total risk of a portfolio. In many cases, digital assets are said to be too volatile. But that doesn’t mean you can’t include them. Even if 6% donate nearly 20% of the risk of their portfolio, they still can integrate thoughtfully.

By placing digital assets in benchmarks, it provides clients with a clear framework for determining risk tolerance. As an investment manager, you can also build and manage your portfolio compared to a clear bogey.

The important thing is to avoid using it. If your client says they take more risks, you might probably want 10% on your digital assets. Respect it and design your portfolio accordingly. At 10%, they explain that they are taking on the risk of very high concentrations, but ultimately that’s their purpose and we work in it.

We already say our clients from crypto origins want a portfolio of 60% digital assets and 40% traditional, stocks, bonds and some private markets. In that case, the benchmark is clear and our job is to beat it.

Most importantly, letting clients understand exactly how much risk they are taking when scaling to a higher allocation of digital assets.

CN: For individual clients and private offices, do they want basic exposure or a more positive strategy?

MG: Generally, it starts with just dipping your toes. In a family office, it really depends. Some are very active in digital assets and are not involved at all. It’s difficult to generalize, but most have at least some interest.

For many investors, especially large institutions, it’s still about education. It explains the risks, shows you that there is a robust investment process, and helps you gain that initial exposure.

CN: Do you have any insights into how other agencies are approaching client demand for crypto?

MG: I think the industry is where we are. From what I’ve seen, many institutional managers are not involved in asset classes at all. They often write it down as being too volatile.

Many institutions focus solely on Bitcoin, and don’t look deeper. In contrast, there is an investment process that evaluates digital assets in five different sectors. Cryptocurrency, Smart Contract Platform, Defi, Utility Tokens, Consumer Tokens. We have developed a rather sophisticated way to evaluate them, as with other investments.

Under the hood there is a huge diversification. All of that is not very liquid, but for investors who don’t trade trillion dollar portfolios, most of them can do a lot.

What many big players see is, “You can give 1-2% with a code. That’s enough to test the water.” But ironically, that approach reflects the behavior of retailers. So, like 2% of your portfolio is a speculative bet, they don’t think it’s a big deal if they lose it.

If you are an institution, losing 2% is important. And by taking such a simple “water toe” approach without proper risk analysis, you are not only short of it, but also putting its allocation into a higher risk. Such a way of thinking is flawed, but it is still common.

CN: Some traders believe that Bitcoin is an anti-cyclical asset. Do you buy that argument? How does it relate to that case as a diversifying asset?

MG: I don’t buy arguments. The data is pretty clear. Bitcoin is a cyclical and highly beta asset. Exchange it in the same way as a risky portion of the market, something like high-yield credit. There is a strong correlation with risk assets.

Perhaps more controversial is that this correlation will increase as more institutional investors adopt Bitcoin. They frame it as a risk asset and it behaves like that.

As Bitcoin becomes more institutionalized and centralized, its volatility will decrease, but its correlation with traditional funds will increase. In the long run, I actually think it’s a good thing, but that also means that Bitcoin doesn’t look like digital gold, but it looks like a high-growth tech asset.

Well, I want to be clear. I’m generally bullish about digital assets, but I’m not particularly bullish on Bitcoin.

The main reason is that it is a network asset. It’s digital gold, but it doesn’t have a history of 1000 years of belief and value in the way gold works. Both assets are reliant on recognition. Gold is something people believe it is worth it, and Bitcoin is worth it too. But Bitcoin still doesn’t have that long-term trust.

If a small number of large holders decide to move to something else, it can cause serious confusion. I’m not saying it will happen, it’s not my basic case, but the possibility is there. On the other hand, we have seen strong correlations with significant volatility with risk assets.

That said, recruitment is realistic and Bitcoin works well from the recent to mid-term. However, in the long run, I think other assets are even more interesting.

Ethereum, for example, is a technology investment. Solana has a payment infrastructure that can support cross-border transactions. These platforms have real utilities and potential staying power. For me, they are much more diverse than Bitcoin.

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CN: So, when you look at crypto from a risk-and-investment perspective, how do you distinguish between different projects?

MG: Step 1 is to identify what token you are looking at. Is it a true cryptocurrency like Ripple? Smart contract platforms like Solana and Ethereum? Defi tokens like uniswap? Or is it like decentraland, like consumer and game-centric tokens? Then there are utility tokens like ChainLink. I’m just giving an example here. I’m not saying they are necessarily our top picks.

Once you have categorized the tokens, look at six core factors.

Quality: total supply, protocol inflation rate, and circulating supply for daily active addresses.

Size: This is simply a log of market capitalization. This helps to contextualize where the project is in the wider ecosystem.

Growth: Consider transaction trends, network usage, and developer activity over time.

Value: Nettoken Value, Pricing Metrics, and Revenue, if applicable.

Momentum: Momentum in a year is still very predictable in this area.

Intangible assets: This is one of the most interesting things. This includes Github Commits contributing to the project, social media activities (particularly from influential accounts), and a wide range of developer engagement, particularly for smart contract platforms.

In addition to these factors, we use different models depending on the type of token.

For example, if the protocol generates cash flows such as Ethereum or Solana, you can use a discounted cash flow (DCF) model. That’s something traditional investors can understand.

It also uses a network model. In particular, for tokens that do not make revenue in the traditional sense, they rely more on metrics such as growth, quality, and value.

Then there is a statistical model, where technical analysis and regression techniques are applied. For example, you might look at the assets to which the token is most correlated, project the beta, and then estimate the potential behavior based on it.

The key is that spaces are not treated as monolithic. Approach with the same analytical rigor as it is used in other asset classes. That’s why I think there’s an advantage over many other players.

CN: Regarding valuations, how do crypto projects compare to traditional risk stocks?

MG: The rating is definitely high. It follows an early stage venture than a mature public company. And that makes sense.

Solana, for example, is comparable to Series C or D startups over large tech companies. The difference is that it can be exchanged like a public company. From a democratization perspective, it’s actually one of the really cool things about digital assets, and anyone can get into the early infrastructure.

That being said, we see a real link between valuation models and price movements. That’s important. It shows that the market is mature.

But, to be honest, the factor that still puts weight on is momentum. If long-term institutional adoption is required, it should be changed. As momentum decreases, foundations like usage and revenue will begin to become more important. We are already seeing the change, especially as volatility is beginning to decline.

Interestingly, intangible assets like developer activity and social traction have already had a major impact on token performance. And yes, cash flow is beginning to be priced too.

Still, it’s a very momentum driven market. But right behind it we see actual traction from daily active addresses, network usage, and supply dynamics.

As space is held more institutionally and traded like a speculative frenzy, balance is expected to continue moving towards the foundation.

CN: To be clear, is cipher evaluations approaching AI companies or is it a more traditional technology?

MG: Much closer to AI startups and VC-stage high-tech companies. And that makes sense, many of these are still early in their life cycle. Projects like Solana should be compared to Series C or D venture stage companies rather than mature public companies.

What’s unique is that it can actually be exchanged like a public company. It’s quite innovative. From a democratization perspective, that means that anyone can be exposed to the kind of innovation that has traditionally been trapped behind the private market.

You can’t go out and buy stocks at a private AI startup. However, you can purchase tokens tied to the infrastructure of the Blockchain protocol. That is a major change in access.

And despite its high ratings, there is a clear link between the underlying metrics we track, such as usage, cash flow, development activities, and actual price performance. That connection is important.

It gives investors the confidence that this is not just speculative fluff. These tokens are beginning to be exchanged not only for hype, but for real-world dynamics.

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CN: There is a growing trend towards asset tokenization, and more recently, even the Nasdaq has demonstrated a potential appeal to the market. What are the advantages and disadvantages of that model?

MG: With public equity, the benefits are fairly limited. You can already trade stocks outside of business hours. You can already buy fractional shares. Therefore, symbolizing traditional inventory is not much added.

Where tokenization really shines is in private assets such as private equity, venture capital, real estate and more. These are, by definition, illiquid. Although there is a secondary market, it is difficult to access and often requires deep connections. Many companies, including us, have built an advantage in the secondary market through those relationships.

When representing private assets, institutional investors can create their own liquidity in a transparent, on-chain way, without resorting to intermediaries.

On the other side, for individual investors, tokenization allows them to access asset classes that have traditionally been excluded. Imagine you can buy private equity on your 401(k) without being trapped in illiquidity. It’s a game changer.

And if you zoom out: the US economy is currently dominated primarily by private equity. Previously, small US caps were considered “real economy.” But now, the Russell 2000 is full of businesses that have taken over private equity. The open market is a spectacular 7. Are you controlled by everything else? It is in the private market.

So, when talking about democratized access, tokenizing private equity is a big thing. It addresses true inequality in access to economic growth.

They are also exploring brand new asset classes that are enabled for tokenization, cultural assets and music loyalty. These do not actually exist in traditional investments. Because the smart contract infrastructure needs to be able to be run.

Five years later, the private property landscape could be radically different. Even the term “private” can lose its meaning. There may be liquid but not listed assets that may be traded 24/7 in a peer-to-peer structure without touching central exchange.

We are already building this kind of infrastructure with the Benji On-Chain Money Market Fund. That same technology can be applied to tokenized real estate or yield assets. Imagine moving billions of dollars on tokenized real estate and instantly increasing the yield. There is no delay in settlement or intermediary. This is a major upgrade for investors of all kinds.

CN: How does the current macroeconomic environment affect crypto assets?

MG: This is something I’ve been thinking about recently. Especially since we have just started a new rate cut cycle, it’s a macro environment.

Even if Powell did not explicitly use the word, we are in the stag period. It’s not because of strong economy and declining inflation, but because the labor market is weakening, but fees are being cut. The CEO is worried about tariffs and intends to pass those costs to consumers. Consumers’ confidence is declining. Unemployment is on the rise. Inflation is still rising and could increase further.

All of that point to the structurally weak US dollar.

If you are a foreign organization like a Sovereign Wealth Fund and you are hurt by US tariffs, you will consider reducing your dollar exposure. That doesn’t necessarily mean you’re buying crypto, but that means that the global domination of the dollar is being eroded.

And as the dollar weakens, use cases for digital assets get stronger.

Cross-border transactions are the perfect example. Outside the dollar system, they are slow, expensive and full of friction. It’s seamless on digital assets, especially smart contract-based platforms. This creates a strong tailwind for recruitment.

Therefore, from a macro perspective, we are particularly bullish about transaction protocols such as Solana and Ripple. The more the dollar becomes the default medium of global trade, the faster and more demand for decentralized alternatives.

Businesses and consumers are increasingly moving their transactions in chains. It is a secular trend, not a cyclical trend. And it’s accelerating.

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