• If nervous about missing the run, consider taking a small initial position in digital assets and go from there. Going through the steps of buying bitcoin is a worthwhile learning experience in itself.
• The trading range expectation is wide. We’d be surprised if bitcoin fell more than 80 percent, but it could get to a trillion dollar market cap—compared to a $7+ trillion market cap for gold—which is still up 4 to 5 times.
What should financial advisors do?
Firstly, financial advisors (FAs) should understand the potential of distributed ledger technology. One does not have to like or buy bitcoin, but to wave off the whole thing as a fraud is probably wrong. Large U.S. corporations are investing in blockchain-related projects, and, given that Coinbase has over 10 million U.S. clients, it is likely that an FA’s client has bought bitcoin and is sitting on nice gains.
Secondly, FAs should advise clients to size their digital asset exposure intelligently. Probably zero or a range of over 5 percent-10 percent are not right. And better to buy over time than buy all at once. Lastly, FAs should absolutely make sure that clients are reporting digital asset gains on their tax forms.
Jan van Eck is CEO, and Gabor Gurbacs is director of digital assets strategy at VanEck.