Cryptocurrency is nowhere near being adopted by the masses, but thanks in part to a maturing of the market and some stellar returns in 2019, more financial advisors are planning to allocate investment dollars that way.
That’s according to a new survey of more than 400 financial advisors conducted by Bitwise Asset Management, the cryptocurrency investment firm and ETF Trends, the Website focused on everything ETF related. They found the percentage of advisors who are allocating to crypto for their clients will hit 13% in 2020, up from 6% in 2019.
The number one reason driving that: crypto returns. Of the financial advisors polled, 54% cited that as the reason to allocate more investment dollars to digital currency. It’s 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.”
Rewind to 2017 and the world couldn’t get enough of cryptocurrencies. With the price of bitcoin moving higher seemingly every day it became the topic of conversations on golf courses and around water-coolers across the world.
With tales of overnight riches swirling, the price of bitcoin was driven to an all-time high of more than $2,100. Then everything came crashing down. Regulators started looking into cryptocurrencies, initial coin offerings by companies turned out to be scams in some instances and scores of investors lost a lot of money betting on a never-ending rise in the price of bitcoin. Bitcoin and cryptocurrency were written off as investors sought other ways to get exposure outside of stocks and bonds.
That all changed again in 2019 when the price of bitcoin began to climb thanks in part to the entrance of Fidelity Investments and CME into the market. That brought legitimacy to the asset class and sent it higher once again. Bitcoin ended 2019 up 90% and has been gaining since the start of the year. That hasn’t been lost on financial advisors either, and thus the growing interest in it.
“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.”
So how are financial advisors acquiring cryptocurrencies for their clients since there isn’t a digital currency ETF in the market yet. Hougan said there are either acting in an advisory role, showing clients how to purchase crypto in a secure and safe environment, investing in the Grayscale Bitcoin Trust which trades over-the-counter or are purchasing shares in private funds that provide access to cryptocurrency like the Bitwise 10 Large Cap Crypto Index.
The financial advisors interested in cryptocurrency are also optimistic about its trajectory in the years to come. Of the survey respondents, 64% expect the price of bitcoin to increase in the next five years.That’s up from 55% in last year’s survey. Meanwhile, 34% think the price of bitcoin will at least double by 2024.
“Crypto continues to be top-of-mind for advisors searching out new and uncorrelated sources of return,” said Tom Lydon, founder, and CEO of ETF Trends in a press release announcing the results. “The survey results clearly indicate growing interest in crypto from advisors and their clients alike.”