As 2022 starts to unfold, digital assets and blockchain technology seem to be everywhere.
And not just in the conversations about ongoing volatility in bitcoin, ethereum and other cryptocurrencies, said Ric Edelman, founder of the Digital Assets Council for Financial Professionals (DACFP), formerly known as the RIA Digital Assets Council.
“Digital assets are becoming ubiquitous,” said Edelman. “When you see Matt Damon doing TV commercials at the Super Bowl for Crypto.com, or FTX buying the naming rights to a sports arena with Tom Brady serving as a brand ambassador, when you see the FTX logo on the umpires’ uniforms at the World Series, you know it’s everywhere.”
Brands are raising consumer awareness of digital assets, and consumers in turn are taking the attitude that they want to buy them, said Edelman. If advisors can’t or don’t help these consumers then they will go somewhere else for advice.
Why Go Crypto?
The reasons to get involved in crypto are clear, said Edelman: Advisors need to be knowledgeable so they can serve clients.
“Advisors now realize that this isn’t going away, it’s not a fad and it’s not a fraud,” said Edelman. “This technology is revolutionary and it is being adopted by every industry on a global basis. It is going to transform commerce in an unprecedented way. I think this is the biggest thing for global commerce since the internet itself. Advisors realize now that there is a 'there' there, this isn’t going away but will be increasingly impactful.”
The asset class also has a maturing infrastructure, said Edelman, with more leading companies offering investors and advisors entries to handle and invest in digital assets.
Companies like Fidelity, Global X, BNY Mellon and most of the major banks are now engaging and providing custody, investment opportunities and other infrastructure, said Edelman. Their presence is moving bitcoin and digital assets in general away from the “wild west” of their early years and into respectability.
“The most compelling reason for advisors might be that the investment thesis is sound,” said Edelman. “Bitcoin and other digital assets have demonstrated that they are additive to portfolio diversification. The non-correlation and the outsized returns dramatically improve the risk-return composition of a portfolio as measured by metrics like Sharpe ratios, Sortino ratios, standard deviations and maximum drawdowns.”
Because these risk-measuring statistics can be improved with even a small addition of digital assets to a diversified portfolio, Edelman said that advisors are discovering that they can create better outcomes for clients.