By Thomas Kostigen
More and more people are eying cryptocurrency as an investment. And more and more financial advisors are planning to allocate their clients’ assets into the category.
If your financial advisor isn’t well-versed in cryptocurrency, it may be time to look around for one who is knowledgeable in the nuances of this burgeoning asset class.
Many financial advisors have become expert in cryptocurrency investing. According to a study by Bitwise Asset Management, twice as many financial advisors will be allocating clients assets to cryptocurrency this year as compared to last. The reason these advisors cite is the returns on investment that cryptocurrencies are bringing in. In 2019, cryptocurrency prices tripled in value. The price of bitcoin went from about $3,300 in 2019, to end the year at about $9,300. Prices have increased since, and stand about around $9,600 as of this writing. Ethereum, the other crypto market index, has doubled year over year-to-date. And, importantly, volume has hit records levels, with Ethereum eclipsing $4.5 billion in transactional volume value. This has, of course, incited questions from investors: 76 percent of all financial advisors’ report receiving questions from clients on crypto in 2019, according to Bitwise.
In previous columns, we have explored the efficiencies, custody, administration, and even the trading benefits of cryptocurrencies. All of these areas certainly strengthen cryptocurrencies’ appeal to main stream investors, advisors, and brokerages. Indeed, nearly two thirds of the advisors surveyed for the Bitwise study said they expect bitcoin, deemed the most indicative of the cryptocurrency market, to increase over the next five years. More than a third of those surveyed believe bitcoin will more than double over that time period.
“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. As the survey shows, advisors are responding to the rapid maturation of the space by increasingly planning to incorporate crypto into their asset allocation mix,” said Matt Hougan, Bitwise managing director and global head of research.
The growing interest and return possibilities of cryptocurrency means that as an investor, you should be at least aware of its growth as a mainstream asset class—something you could or should invest in. As for advice, your financial advisor should be more than aware; he or she should be astute about how cryptocurrencies might complement your portfolio, in both the near and long terms.
“Crypto continues to be top-of-mind for advisors searching out new and uncorrelated sources of return,” said Tom Lydon, founder and CEO of ETF Trends. “The survey results clearly indicate growing interest in crypto from advisors and their clients alike.”
Financial advisor trade magazines are even stating the opportunities for advisors in the cryptocurrency marketplace. A recent headline from one outlet asked: “The Blockchain And Cryptocurrency Revolution Is Maturing: Are Advisors Ready to Take Advantage?” It should be a question on many investors’ minds.
Thomas Kostigen is a contributing writer to MyPerfectFinancialAdvisor , the premier matchmaker between investors and advisors. Thomas is a best-selling author and longtime journalist who writes about environmental, social, and governance issues.