Not only that, in recent months, macro investors from the realm of traditional finance like Paul Tudor Jones, Stanly Druckenmiller, and Bill Miller have been vocalizing their support for Bitcoin and how it can potentially replace gold for an entire generation of younger, more tech-savvy investors as a long-term store of value (SOV). It also bears mentioning that buying cryptocurrencies has never been easier for the average person, especially with companies like PayPal (which boasts a 150 million-strong userbase), Robinhood, and Square entering this space.
Another indicator of Bitcoin’s ever-growing market clout is that several mainstream banking giants have been making bold predictions regarding the future valuation of the crypto asset. For example, analysts for JP Morgan and Raiffeisen bank believe that in the mid-to-long term, Bitcoin’s valuation could easily lie above the $150,000 mark.
Financial advisors need to adapt QUICKCryptocurrencies are quickly becoming the hottest new asset class for retail as well as institutional investors globally. That being said, historically, it hasn’t been all that easy for individuals to incorporate these novel assets into their investment portfolios. However, things have reached a tipping point now. An increasing number of financial advisors are beginning to understand that by excluding cryptocurrencies from their AUM, they are losing out on one of the biggest financial opportunities of their careers.
To put things into perspective, as per a Bitwise study related to financial advisor attitudes towards crypto released last year, 76% of all interviewed advisors had their clients ask them about cryptocurrencies, while another 72% reported having suspicions that their clients may be dabbling in digital currency acquisition outside of their advisory relationship.
This seems to suggest that sooner or later, most advisors will have to completely rethink their investment strategies and adapt to this new era of digital finance that is looming large on the horizon. Trust and faith lie at the very heart of the client-advisor relationship. If people continue to accumulate cryptos behind the scenes, advisors’ ability to provide comprehensive financial management to their clients will become greatly compromised. The solution is at hand. To help financial advisors and retail traders make a smoother entry into the realm of crypto finance, exchange-traded products such as Grayscale Bitcoin Trust (GBTC) and the Bitwise 10 Crypto Index Fund (BITW) have emerged. These products allow crypto exposure from existing brokerage and trading platforms in a trading style that is familiar to any advisor.
However, today an increasing number of individuals, especially millennials with a high net worth, are buying crypto directly on cryptocurrency exchanges. These assets are stored either on the retail exchange platforms or in personal self-custody wallets. Therefore, they are not captured as part of an advisor’s AUM (leading to no advisor fees being generated).
Fortunately, new tools have emerged to solve this problem of segregated assets outside the scope of existing platforms. There are now white-labeled cryptocurrency portfolios designed to seamlessly integrate with a wide array of leading exchanges and wallets, allowing advisors to obtain detailed balance and transaction histories, allowing them to start tracking their client’s crypto assets as well as determine tax burdens as they do with any other investment.
With cryptocurrencies (finally) tracked, advisors can have the complete financial picture for their clients and also have an opportunity to include these assets in their overall AUM, leading to a completely new revenue source.
By Alex Treece, Founder at Zabo