Bitwise is known within crypto investing as the first and also largest crypto index provider globally. Its focus is on financial advisors in the products it offers, and it typically has its finger on the pulse of advisor sentiment towards crypto. Bitwise’s Matt Hougan, global head of research, and Mick McLaughlin, head of business development, joined Dave Nadig, CIO and director of research for ETF Trends and ETF Database, in a webcast to discuss advisor responses to a survey regarding crypto investing.
Bitwise and ETF Trends recently conducted their annual survey of advisors regarding crypto for the fourth year in a row, and the project included more than 600 financial advisors. The trend that they noticed, particularly in this most recent year, is an increasing and accelerating interest and investment into crypto by advisors.
Crypto had a volatile but ultimately stellar year last year as an asset class when looking at prices compared to other major asset classes such as oil, the S&P 500, international and emerging markets, and others. Crypto assets vastly outperformed any of the other asset classes while also continuing to diversify.
“Crypto has really changed from a bitcoin story to a crypto story with a lot of different sub-stories in that,” Hougan explains. This is exemplified in the performance of the securities within the Bitwise 10 Large Cap Crypto Index, an index of the largest assets within crypto, which saw returns ranging from 15% all the way up to 14,000%.
The growth that happened within the cryptosphere in 2021 was equally impressive; there was record venture capital investment, the number of developers working in crypto almost doubled year-over-year, and the number of users of MetaMask (a crypto wallet that allows you to log into crypto apps) was up 2,000% to 21 million people. What’s more, major banking institutions are now investing in crypto or offering crypto services, and the space has continued to diversify.
“We are evolving from this sort of speculative, future-concepting, infrastructure build to actual utility. It now matters how many people are logging in and using crypto in the same way we use the internet, but for different things,” says Hougan.
Of the advisors surveyed, 94% reported that they had received questions from clients regarding crypto in the last 12 months, up from 81% the year before, and 68% reported that they had clients who were investing on their own in crypto last year, up from 36% in 2020. Advisors are also asking their clients if they’re investing in crypto much more often, reflecting a more proactive approach and signaling a change within the financial advisor industry towards crypto.
Advisors are personally investing in crypto at much greater rates, from 24% in 2020 to 47% in 2021, with more than half of RIAs and broker-dealers reporting being personally invested. On the other side, advisors are also allocating crypto in their clients’ accounts more often, with 16% reporting having done so in the last 12 months, up from 9% the year prior.
“We’ve found at Bitwise that personal allocations are often the leading indicator of future client allocations. Advisors like to test the waters first, and this is just a massive mainstreaming of advisors allocating in their PA’s to crypto,” Hougan explains.
McLaughlin adds that he believes this coming year will be one that includes more model strategies being introduced and crypto incorporated more often but that a major challenge still remains in the amount of work and uncertainty in how to provide crypto investment options on a scalable level by advisors.
Advisors reported in an even amount that they would invest in crypto equities or bitcoin, with the greatest number saying they would prefer to invest in a combination of the two. The biggest thing holding them back, though, continues to be regulatory concerns and volatility.
“If I look at these survey results, I think they’re very telling. Advisor engagement in crypto is up significantly, almost every advisor is fielding questions from clients, advisors are getting pushed by clients to allocate, the percentage that is allocating is increasing. Every indicator we look at say this is a growing piece of the advisor puzzle,” says Hougan.
Financial advisors who are interested in learning more about advisor sentiment towards crypto can watch the webcast here on demand.
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