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How Should Financial Advisors Be Thinking About Bitcoin?

As Bitwise and ETF Trends present the findings of the 2020 Crypto-for-Advisors study, discussing how wealth managers have used crypto assets as part of consumer portfolios, financial advisors who are involved in dabbling in cryptocurrencies can find out what their colleagues think about the asset class.

The currency market has been stirred by virtual currencies, more generally referred to as cryptocurrencies or cryptocurrencies for short. Bitcoin, the most common cryptocurrency, has no actual physical life, and others like it. Only in the digital world do they live. Their value is specified by a blockchain or complicated code that is totally anonymous and independent of any government issuer, but can be exchanged between multiple computers. This makes crypto desirable for both legitimate and illicit (laundering of money from drug sales) use (such as supply chain transactions between a corporation and its suppliers).

Financial Advisors and Their Take on Cryptocurrency

In the recent Bitwise/ETF Trends 2020 Benchmark Survey of Financial Advisor Attitudes towards crypto assets, which included 994 qualified financial advisors in their personal portfolio of independent RIAs, broker dealers, financial managers, and wirehouse members, 76% said they do not own crypto.

In the past 12 months, about 19 percent of respondents said customers have not asked about cryptography. The 26 percent of survey respondents revealed that customers do not invest on their own in crypto and 38 percent said they do not know about any of the crypto mining investments of customers.

The majority of participants do not assign crypto to consumer accounts, or 91 percent. However, only 15 percent said they would certainly not assign any crypto to consumer accounts in the year ahead and 28 percent suggested they will potentially not, which leaves plenty of space for future customer conversations.

Participants in the survey highlighted low or uncorrelated returns on other properties, high potential returns, something fresh to offer customers and inflation hedging, among the most common reasons for adding crypto to a portfolio.

Why Financial Advisors Are Attracted to Bitcoin

Fifty four percent of financial advisors see Bitcoin’s lack of correlation to other asset classes as a justification to incorporate the crypto asset (or one of its competitors) to customer portfolios, according to the study from Bitwise and ETF Trends.

That finding aligns with the qualitative view of Bitwise of how the primary narrative emerged in 2020 around the investment aspects of crypto. the experts at Phoenix Store UAE believe that 2020 saw a significant uptick in conferring crypto as a ‘safe haven asset’ and a new form of ‘digital gold’ among both mainstream media and traditional Wall Street analysts. This appears to have resonated with the community of financial advisors.

With increasing concerns about inflation, shrinking supply, and the rapid normalization of the asset class combined to help drive up prices, 2020 was a transformative year for bitcoin and crypto. In this world, consultants are increasingly allocating crypto, with the percentage of consultants allocating almost 50 percent year-over-year to customer accounts. If present trends hold, 2021 could be a significant year for advisor adoption. According to the survey, 17 percent of advisors who do not allocate today plan to allocate in the coming year.

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