More financial advisers are considering allocating to cryptocurrencies, despite widespread concern about regulation and volatility.
Bitwise and ETF Trends surveyed 415 American financial advisers and found that increasing client interest in cryptocurrencies such as bitcoin and ethereum – along with their attractive returns – is driving more and more advisers to allocate to crypto in client portfolios.
While just 6 per cent of surveyed advisers currently had an allocation to crypto assets in client portfolios, those numbers are set to increase, 45 per cent were open to allocating to crypto in client portfolios in the next year.
Many advisers found cryptocurrency an attractive investment due to the low or uncorrelated nature of its returns when compared with other asset classes.
“That finding aligns with Bitwise’s qualitative view of how the primary narrative surrounding the investment aspects of crypto evolved in 2019,” the report reads.
“From our perspective, 2019 saw a significant uptick amongst both the mainstream media and traditional Wall Street analysts in discussing crypto as a 'safe haven asset' and a new form of 'digital gold'. That messaging appears to have resonated with the financial adviser community.”
However, advisers are also highly aware of the dangers of the asset class, with 56 per cent noting the unmapped regulatory territory that cryptocurrencies occupied. Better regulation would make advisers more likely to invest in cryptocurrency (58 per cent), along with 'better custodial solutions' and 'better education' (42 per cent).
Other concerns that advisers flagged included that fact that cryptocurrencies were too volatile (43 per cent) and that they could be in a bubble (13 per cent).
However, Bitwise believes that the way ahead is clear.
“It will be interesting to see how the market evolves in the next 12 months,” the report reads.
“After all, the number of advisers explicitly looking to allocate to crypto is expected to double in the next year, and there are many highly anticipated industry developments on the horizon.”
“What’s clear is that advisers are continuing to look at the space, seeking to build their understanding, and are increasingly finding ways to serve their clients’ interests and activity in this new asset class.”
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