While the percentage of advisors considering cryptocurrencies for their clients’ accounts is still low, there are signs that allocators are warming to the asset class.
The number of advisors considering allocating client assets to cryptocurrencies is set to double, from 6% in 2019 to 13% in 2020, according to a recent survey by Bitwise Asset Management.
“2019 was a breakthrough year for crypto," said Matt Hougan, Bitwise managing director and global head of research, in released comments. "Crypto was the best-performing asset class in the world last year, with the Bitwise 10 Large Cap Crypto Index rising 52%. Moreover, crypto demonstrated real value as a hedge against geopolitical risk. Meanwhile, we saw significant evolution in the market for crypto custody and liquidity, with players like Fidelity, CME and Intercontinental Exchange all launching solutions."
Hougan interpreted the survey results as showing a positive response by advisors to the “maturation” of the cryptocurrency space and growing comfort with using the asset class in their clients’ portfolios.
But perhaps they’re gravitating toward Bitcoin, Ethereum, Ripple and their kin in response to investor demand—76% of the advisors in the survey reported receiving client questions about the asset class from their clients, and 72% said they believed their clients may be investing in cryptocurrencies on their own, outside advisory relationships.
Yet just 26% of the respondents said that client demand was their leading motivation for including digital currencies in their asset allocation.
For advisors, the largest draw to cryptocurrencies is uncorrelated returns, named by 54% of the respondents in the survey. The respondents also named high potential returns (30%) as a significant draw.
Advisors are also optimistic about Bitcoin’s price, with 64% expecting it to appreciate over the next five years; 35% of the respondents expected the price to double or more, and 5% expected it to increase tenfold or more in value.
Earlier this week, Bitwise withdrew its application with the SEC for a Bitcoin ETF after the commission rejected its proposal in fall 2019.
Bitwise and ETF Trends fielded the survey in December 2019 among 415 financial advisors across segments including RIAs, broker-dealer representatives, financial planners and wirehouse representatives.