Cryptocurrency isn’t bordering on mass adoption yet, at least by the general population. However, a new survey by Bitwise Asset Management of more than 400 financial advisors, shows that 13% of advisors would be allocating crypto to their clients in 2020, up from 6% in 2019. Let’s take a look at how crypto crawled its way into financial advisors’ hearts.
What’s pushing financial advisors towards crypto?
The number one reason financial advisors are straying towards crypto is simple: the returns. Of the 400 financial advisors surveyed, 54% said that they would allocate more investment dollars to digital currency because of its return characteristics, up from 47% in last year’s survey.
“The return characteristics are hard to ignore,” said Matt Hougan, Bitwise managing director and global head of research. “It’s really hard to find assets not correlated with stocks and bonds that have the potential for higher returns that anyone can access.”
2017 saw Bitcoin and digital assets booming, with Bitcoin reaching $20,089 – it’s all time high to date. Then things came to a sudden, and screeching, holt. Regulators started delving further into cryptocurrencies, and initial coin offerings from certain companies turned out to be scams. 2018 saw an utterly dismal year for the industry, and it was almost written off by investors.
Then, 2019 came and cryptoassets rallied. The price of Bitcoin began to climb, in part because of the entry of Fidelity Investments and CME into the market – bringing legitimacy to digital assets once more. Bitcoin ended 2019 up 90%, and has continued gaining. The next Bitcoin halving due in May 2020 could be partially to blame, but Hougan theorizes that it’s something else:
“What we are seeing happen is its moving to a broader audience of advisors,” said Hougan. “The reason that’s happening is it’s proven it’s not going anywhere. Regulations are clearing up and major firms like Fidelity are coming into the market.”
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How are financial advisors acquiring crypto for their clients?
There isn’t a digital currency ETF yet, but Hougan said that financial advisors are acquiring crypto for their clients in two ways:
- By acting in an advisory capacity for their clients – and showing them how to purchase crypto in a secure environment, such as investing in the Grayscale Bitcoin trust.
- By purchasing shares in private funds that provide access to crypto, such as the Bitwise 10 Large Cap Crypto Index.
Financial advisors who are interested in crypto are also fairly optimistic about its future trajectory. 64% of survey respondents expect Bitcoin’s price to increase in the next five years, and 34% believe Bitcoin’s price will double by 2024.
According to Tom Lydon, founder and CEO of ETF Trends, “Crypto continues to be top-of-mind for advisors searching out new and uncorrelated sources of return. The survey results clearly indicate growing interest in crypto from advisors and their clients alike.”
Financial advisors are stepping into the future
Now that we’ve seen how crypto crawled its way into financial advisors’ hearts, it’s pretty clear that they’re stepping up and looking into the future. The statistics are already way up from last year, with 13% of financial advisors reporting that they plan to include digital assets in their clients’ investment portfolios. And really, it’s about time. 2019 was a solid year for cryptocurrencies, and it’s likely that 2020 will be even better. With the next Bitcoin halving due in May, we’re probably going to see a massive crypto bull run in the near future. Rather than buying in at the top (like various poor folks in 2017), buying in now should generate a solid ROI. Should Bitcoin be confirmed as an ETF in 2020, we’ll see even more financial advisors climbing on board – and that’s great news for crypto, and for the digital asset community as a whole.