Crypto demand is rising, but institutions are still behind, Franklin Templeton’s Max Gokhman says

Franklin Templeton’s Max Gokhman explained what the investment firm is doing to meet increasing client demand for crypto assets.

As the digital-asset space matures, institutional interest is rising, especially due to increased client demand. However, most financial institutions are still lagging behind when it comes to this asset class, says Max Gokhman, CFA, deputy CIO at Franklin Templeton Investment Solutions. In an interview with crypto.news, Gokhman explained what the investment giant is doing to meet demand from its clients that want to invest in crypto assets.

crypto.news: Do you see growing demand for digital assets among your clients?

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

Interestingly, there’s growing interest from traditional investors, reflected in the $175 billion of flows into digital asset ETFs. There’s also demand from the crypto-native side, who are looking to diversify out of pure crypto holdings into a more balanced portfolio.

Then there’s the middle ground, family offices and smaller endowments. Many of them are seeing increasing demand for digital assets and want to integrate them into their broader portfolios.

So one of the things we’ve been thinking about is how to build appropriate products for each group. For large institutions, it’s about using digital assets without introducing excess volatility. For retail investors, it’s about scaling digital assets into a traditional portfolio with a risk-aware framework. And for family offices and endowments, it’s about integrating them into the total portfolio—similar to how we treat less liquid assets like private equity, alongside more traditional public market investments.

It’s a changing picture, and I expect demand to continue rising, especially as regulatory clarity improves.

CN: What are some examples of products you are developing for clients intersted in crypto?

MG: One product we’ve already launched is a suite of asset allocation models that incorporate digital assets alongside traditional investments.

We’ve built portfolios with digital asset allocations ranging from 1% to 6%. That is 1% for a conservative position, and 6% for a highly aggressive one. In that aggressive model, for example, it’s 94% equities and 6% digital assets.

The rationale is that in asset allocation, you generally don’t want any single asset class to account for more than a fifth of your total portfolio risk. People often say digital assets are too volatile—and they are. But that doesn’t mean you can’t include them. Even if 6% contributes close to 20% of portfolio risk, it can still be integrated thoughtfully.

By putting digital assets on the benchmark, we give clients a clear framework to determine their risk tolerance. It also allows us, as investment managers, to build and manage portfolios relative to a clear bogey.

The key is to avoid being patronizing. If a client says they’re comfortable taking more risk, maybe they want 10% in digital assets, we respect that and design the portfolio accordingly. We’ll still explain that at 10%, they’re taking on a very high concentration of risk, but ultimately it’s their objective, and we work within that.

We’ve already had crypto-native clients tell us they want portfolios that are 60% digital assets and 40% traditional, equities, bonds, maybe some private markets. In that case, the benchmark is clear, and our job is to beat it.

The most important thing is making sure clients understand exactly how much risk they’re taking as they scale into higher allocations of digital assets.

CN: In the case of individual clients and private offices, are they asking for basic exposure or more aggressive strategies?

MG: Generally, it starts with just dipping their toes in. With family offices, it really depends—some are very active in digital assets, some not involved at all. It’s hard to generalize, but most have at least some level of interest.

For many investors, especially larger institutions, it’s still about education. Explaining the risks, showing that we have a robust investment process, and helping them get that initial exposure.

CN: Do you have an insight into how other institutions are approaching client demand for crypto?

MG: I actually think the industry is behind where we are. From what I’ve seen, many institutional managers aren’t engaging with the asset class at all. They often write it off as too volatile.

A lot of institutions focus solely on Bitcoin and don’t look deeper. In contrast, we have an investment process that evaluates digital assets across five distinct sectors—cryptocurrencies, smart contract platforms, DeFi, utility tokens, and consumer tokens. We’ve developed fairly sophisticated methods for valuing them—just as we would for any other investment.

There’s significant diversification under the hood. Not all of it is highly liquid, but for investors who aren’t trading trillion-dollar portfolios—which is most of them—we can do a lot.

What I see from many larger players is: “We’ll give you 1–2% in crypto, and that’s enough to test the waters.” But the irony is, that approach mirrors the behavior of retail traders—like a degen putting 2% of their portfolio into a speculative bet, thinking it’s no big deal if they lose it.

If you’re an institution, losing 2% matters. And by taking that kind of simplistic, “toe-in-the-water” approach without proper risk analysis, you’re not only under-allocating—you’re also putting that allocation at higher risk. That kind of thinking is flawed, but it’s still common.

CN: Some traders consider Bitcoin to be a counter-cyclical asset. Do you buy that argument and how does that relate to its case as a diversifying asset?

MG: I don’t buy the argument. The data is pretty clear: Bitcoin is a cyclical, high-beta asset. It trades similarly to the riskier parts of the market—like high-yield credit—and maybe even more so than small-cap equities. It has a strong correlation to risk assets.

What’s perhaps more controversial is that I think this correlation will go up as more institutional investors adopt Bitcoin. They’ll frame it as a risk asset, and it’ll behave like one.

As Bitcoin becomes more institutionalized and more centralized, I think its volatility will decline, but its correlation with traditional finance will rise. Long term, I actually think that’s a good thing—but it also means Bitcoin will look less like digital gold and more like a high-growth tech asset.

Now, I want to be clear: although I’m bullish on digital assets overall, I’m not particularly bullish on Bitcoin.

The main reason is that it’s a network asset. It’s digital gold, but it doesn’t have that thousand-year history of belief and value the way gold does. Both assets rely on perception—gold is worth what people believe it’s worth, and so is Bitcoin. But Bitcoin doesn’t yet have that long-term trust.

If a few large holders decided to shift to something else, it could cause serious disruption. I’m not saying that will happen, it’s not my base case, but the potential is there. Meanwhile, we’ve seen significant volatility and strong correlation with risk assets.

That said, adoption is real, and near- to medium-term, Bitcoin can perform well. But in the long run, I think other assets are more interesting.

Ethereum, for example, that’s a technology investment. Solana has payment infrastructure that can support cross-border transactions. Those platforms have real utility and potential staying power. To me, they’re much more diversifying than Bitcoin.

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CN: So when you’re looking at crypto from a risk and investment perspective, how do you differentiate between various projects?

MG: Step one is identifying what kind of token we’re looking at. Is it a true cryptocurrency like Ripple? A smart contract platform like Solana or Ethereum? A DeFi token like Uniswap? Or maybe a consumer or gaming-focused token like Decentraland? Then there are utility tokens like Chainlink. I’m just giving examples here—not saying those are necessarily our top picks.

Once we categorize the token, we look at six core factors.

Quality: Things like circulating supply relative to total supply, protocol inflation rate, and daily active addresses.

Size: This is simply the log of market cap. It helps contextualize where the project sits in the broader ecosystem.

Growth: We look at transaction trends, network usage, and developer activity over time.

Value: Net token value, pricing metrics, and revenue where applicable.

Momentum: One-year trailing momentum, which is still highly predictive in this space.

Intangibles: This is one of the most interesting. It includes GitHub commits, who’s contributing to the project, social media activity (especially from influential accounts), and broader 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 a protocol generates cash flows, like Ethereum or Solana, we can use a discounted cash flow (DCF) model. That’s something any traditional investor can understand.

We also use network models, where we rely more on metrics like growth, quality, and value, especially for tokens that don’t produce revenue in the conventional sense.

And then we have statistical models, where we apply technical analysis and regression techniques. For example, we might look at what asset a token is most correlated with, project a beta, and then estimate its potential behavior based on that.

The key point is that we don’t treat the space as monolithic. We approach it with the same analytical rigor we’d use in any other asset class, and that’s where I think we have an edge compared to a lot of other players.

CN: In terms of valuations, how do crypto projects compare to traditional risk equities?

MG: Valuations are definitely high: more in line with early-stage venture than mature public companies. And that makes sense.

Solana, for example, is more comparable to a Series C or D startup than a large-cap tech firm. The difference is you can trade it like a public company. From a democratization standpoint, that’s actually one of the really cool things about digital assets, anyone can gain exposure to early-stage infrastructure.

That said, we are seeing a real link between our valuation models and price movement. That’s important. It shows the market is maturing.

But I’ll be honest, the factor that still carries the most weight right now is momentum. That needs to change if we want long-term institutional adoption. As momentum becomes less dominant, fundamentals like usage and revenue will start to matter more. We’re already seeing that shift, especially as volatility begins to come down.

Interestingly, intangibles, like developer activity and social traction, are already having a significant impact on token performance. And yes, cash flows are starting to be priced in too.

Still, it’s a highly momentum-driven market. But right behind that, we’re seeing real traction from daily active addresses, network usage, and supply dynamics.

As the space becomes more institutionally held, and trades less like a speculative frenzy, we expect that balance to continue shifting toward fundamentals.

CN: Just to clarify, are the valuations in crypto closer to AI companies or more traditional tech?

MG: They’re much closer to AI startups or VC-stage tech companies. And that makes sense, many of these are still early in their lifecycle. Projects like Solana should be compared to a Series C or D venture-stage company, not a mature public firm.

What’s unique is that you can actually trade them like public companies. That’s pretty revolutionary. From a democratization standpoint, it means anyone can get exposure to the kind of innovation that was traditionally locked behind private markets.

You can’t just go out and buy shares in a private AI startup. But you can buy tokens tied to the infrastructure of a blockchain protocol. That’s a major shift in access.

And even though valuations are high, we’re seeing a clear link between the underlying metrics we track, like usage, cash flow, and development activity, and actual price performance. That connection is critical.

It gives investors confidence that this isn’t just speculative fluff. These tokens are starting to trade on real-world dynamics, not just hype.

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CN: There has been a growing trend toward asset tokenization, and recently even the NASDAQ signalled a potential enty into the market. What are some advantages and disadvantages of that model?

MG: With public equities, the advantages are pretty limited. You can already trade stocks after hours. You can already buy fractional shares. So tokenizing traditional stocks doesn’t add much.

Where tokenization really shines is in private assets: private equity, venture capital, real estate. These are, by definition, illiquid. Secondary markets exist, but they’re difficult to access and often require deep relationships. A lot of firms, ours included, have built edge in the secondary market through those relationships.

If you tokenize private assets, institutional investors can create liquidity for themselves in a transparent, on-chain way, without relying on intermediaries.

On the other side, for individual investors, tokenization could let them access asset classes they’ve traditionally been excluded from. Imagine being able to buy private equity in your 401(k), without being locked into illiquidity. That’s a game-changer.

And if you zoom out: the U.S. economy is now largely dominated by private equity. It used to be that U.S. small caps were seen as the “real economy.” But now, the Russell 2000 is full of companies that private equity passed on. The public markets are dominated by the Magnificent 7. Everything else? It’s in private markets.

So when we talk about democratizing access, tokenizing private equity is massive. It addresses a real inequality in access to economic growth.

We’re also exploring brand-new asset classes enabled by tokenization, things like cultural assets or music royalties. These don’t really exist in traditional investing because they require smart contract infrastructure to be feasible.

Five years from now, the landscape for private assets could be radically different. Even the term “private” might lose meaning. You may have assets that are liquid but not listed, trading 24/7 in a peer-to-peer structure without ever touching a centralized exchange.

We’ve already built this kind of infrastructure with our Benji on-chain money market fund. That same tech could be applied to tokenized real estate or yield-bearing assets. Imagine moving billions of dollars in tokenized real estate, and having yield flow instantly. No settlement delays, no middlemen. That’s a huge upgrade for every type of investor.

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

MG: This is something I have been thinking about a lot recently is the macro environment, especially since we just kicked off a new rate-cut cycle.

We’re in a stagflationary period, even if Powell didn’t use that word explicitly. Rates are being cut not because the economy is strong and inflation is falling, but because the labor market is weakening. CEOs are worried about tariffs, and they’re going to pass those costs on to consumers. Consumer confidence is dropping. Unemployment is rising. Inflation is still elevated, and it’s likely to rise further.

All of that points to a structurally weaker U.S. dollar.

If you’re a foreign entity, like a sovereign wealth fund, and you’re being hurt by U.S. tariffs, you’re going to look to reduce dollar exposure. That doesn’t necessarily mean you’re buying crypto, but it does mean the global dominance of the dollar is eroding.

And as the dollar weakens, the use case for digital assets strengthens.

Cross-border transactions are a perfect example. Outside the dollar system, they’re slow, expensive, and full of friction. With digital assets, especially smart contract-based platforms, they’re seamless. That creates a powerful tailwind for adoption.

So from a macro perspective, I’m particularly bullish on transactional protocols like Solana and Ripple. The more the dollar becomes less of a default medium for global trade, the more demand there will be for faster, decentralized alternatives.

Businesses and consumers are going to increasingly move their transactions on-chain. That’s a secular trend, not a cyclical one. And it’s accelerating.

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