Both financial advisor and investor interest in cryptocurrencies is soaring, with the number of advisors investing in digital assets doubling in 2021, according to a new survey from Bitwise Asset Management.
In fact, advisors bought crypto en masse in 2021, albeit for themselves. Almost half of all advisors (47%) reported owning crypto assets in their personal portfolios, nearly double the rate of the prior year (24%), according to the Bitwise/ETF Trends Survey.
Client demand also climbed. Ninety-four percent (94%) of advisors fielded questions from clients about crypto in 2021, up from 81% the year before. More than half of advisors (51%) cited demand from clients as a reason that making a crypto allocation would be attractive, Bitwise reported.
Allocations in client portfolios followed, growing sharply. The percentage of advisors making allocations to crypto in client accounts jumped, from 9% last year to 16% this year. Those numbers were up from 6% two years ago. An additional 14% of advisors said they will “probably” or “definitely” allocate in 2022, Bitwise found.
“We are approaching the tipping point for the widespread adoption of crypto by financial advisors,” Bitwise Chief Investment Officer Matt Hougan said. “Two years ago, just 6% of advisors were allocating to crypto in client accounts; today it’s 15% and our survey suggests it will be nearly 30% by year-end.
The implications are significant, as financial advisors direct the vast majority of private individual wealth in America. “Advisor engagement in the space isn’t just growing, it’s growing at an accelerating rate,” Hougan added.
One advisor who has been investing in bitcoin since 2016 is not surprised. Daren Blonski, co-founder and managing principal of Sonoma Wealth Advisors in Sonoma, Calif. “In client portfolios we keep a very measured position. When you’ve got market volatility like we’ve seen, we use the opportunity to rebalance just like we would with any other asset class. We don’t say ‘the market sold off, we’re going to get rid of bitcoin.”
Blonski’s attraction to bitcoin in particular is based on the fact that it is the sole coin that is truly decentralized, which allows investors to deal directly without using a centralized exchange. At the same time, there are only 21 million coins available and no more can be mined. And now countries such as El Salvador have made bitcoin their currency despite IMF criticism and pleas.
It’s the decentralization that makes bitcoin what it is,” Blonski said. “At the same time, we now you have the U.S. oil and energy infrastructure utilizing bitcoin mining rigs to generate excess revenue.
As a result, “overnight Sen. Ted Cruz (R-Tex.) became an expert in bitcoin because his power base, the energy infrastructure, is using it. You also have gobs of millionaires and billionaires putting together PACs to protect bitcoin.”