Instead of trying to predict whether bitcoin or ethereum will become the dominant crypto currency performer, advisors should consider owning both in client portfolios in single-digit allocations, Ric Edelman, founder of the Digital Assets Council of Financial Professionals, said in an interview this week.
Edelman, who last year predicted that the price of bitcoin will hit $150,000 by the summer of 2025, said he stands by that prediction and expects ethereum to rise proportionately, so that it is worth five times what the coin trades at today, or about $8,500 by mid-2025.
The reason to own both, Edelman said, is because “bitcoin and ethereum together represent about 70% of the entire crypto market cap. They are the Coke and Pepsi of crypto. Yet they are vastly different in their features, benefits and uses, making it reasonable to own both rather than attempt to predict which will enjoy higher or faster price growth.”.
With investors anxiously awaiting the Securities and Exchange Commission’s approval of spot bitcoin and ether ETFs, Bitwise, ProShares and VanEck were among nine asset managers that got the greenlight to launch ether futures funds Monday.
Initial asset flows into the new funds were steady, if a bit lackluster, and the news of the futures ETFs approvals gave both bitcoin and ether a price bump that hasn’t lasted. Ether rose to a months-long high of $1,734 on Monday, but had fallen to $1,633 by this morning. Bitcoin jumped to $28,564 on Monday’s news, but receded to $27,669 early today.
All of the funds plan to replace their futures contracts with direct coin investments once the SEC approves the spot ETFs.
During a DACFP-sponsored webinar on the launch of the ether futures ETFs this week, Bitwise CIO Matt Hougan said his firm will replace futures with actual coins once the SEC approves the firm’s applications.
In a move that may provide an important insight into how the SEC plans to approve spot ethereum and bitcoin ETFs, the agency approved all nine ether futures ETFs simultaneously to ensure that no asset management firm achieved competitive market dominance by being approved first, Bloomberg reported this week.
Bitwise, which also offers bitcoin futures ETFs, on Monday gave advisors the choice of adding a dedicated ethereum ETF with the Bitwise Ethereum Strategy ETF (AETH) or a blend of the two leading coins with Bitwise Bitcoin and Ether Equal Weight Strategy ETF (BTOP).
Up to six-fold increases in both coins would mean “even a fraction of that gain would still far outpace the returns we’ll likely see from all other asset classes during this period,” Edelman said.
The two top crypto currencies have “demonstrated that they are non-corollated to other asset classes, making them ideal for inclusion in a diversified, long-term portfolio. Their presence improves a portfolio’s ability to benefit from dollar cost averaging, periodic rebalancing, and tax-loss harvesting—all best practices of investment management strategies used by most financial advisors,” Edelman said.
They’re also likely to increase performance and actually reduce losses, he said. “The addition of these risky and volatile assets can actually improve overall portfolio returns while reducing risk—exactly as Markowitz demonstrated through his Noble prize winning Modern Portfolio Theory,” Edelman said.