In the past, financial advisors have had many reasons to dismiss Bitcoin (BTC) and other cryptocurrencies as good investments, but this is all starting to change as more institutions adapt to the digital asset class. A face-to-face meeting with Bitcoin between September 2020 and April 2021 reaffirmed the need to go beyond the narrative that digital assets are too volatile to be included in customer portfolios.
In his keynote speech at Virtual CFC 2021 in St. Moritz in January, Grayscale CEO Michael Sonnenschein outlined six major themes that could shape the cryptocurrency market in the near future. One of these concerns was the potential for wider dissemination among financial advisors.
“Curiosity and relevance”
In a subsequent interview with Cointelegraph, Sonnenstein explained that “curiosity and consumer demand are driving financial advisors’ interest in cryptocurrencies.” His conclusion is based on a preliminary survey commissioned by Grayscale, which states that “more than half of consultants receive questions from their clients about cryptocurrency.”
He explains that while it may not prompt immediate action, cryptocurrencies have definitely become a value for consultants. Finally, financial advisors are responsive to client needs, he said, adding:
Crypto in general and Bitcoin in particular were well covered in the press, with corporations and large financial institutions listing Bitcoin on their balance sheets, and prominent entrepreneurs and investors announcing their investment in Bitcoin. If you are a smart investor, you will know more about this asset class, and if you have a financial advisor, you will ask him about it. ”
Sonnenstein also noted that financial advisors are among the investors investing in the Grayscale family of funds, which currently have total assets in excess of $ 46 billion. “Bitcoin remains the most popular digital currency, although we are also seeing increased interest in Ethereum and other digital assets,” he said.
Edward Hindi, co-founder and chief investment officer of Tyr Capital, who is a cryptocurrency hedge fund manager in the United Kingdom, said that financial advisors have increased the allocation of digital assets, especially bitcoins, over the past six months. This shift is also seen in private banks, which have moved from applying for cryptocurrency training to direct investment with Tyr Capital Arbitrage.
He explained, “Much of the attention we see is still focused on the high risk / reward characteristics without channeling funds like Tyr Capital Arbitrage and targeting Bitcoin.”
Opening cryptocurrency no longer means the end of a career
Bitcoin’s newly discovered institutional legitimacy has removed much of the so-called “professional risk” associated with investing in the digital asset market. As Hindi noted, a year ago it was expected that financiers would “risk ending their careers” by investing in cryptocurrencies.
Lack of access to digital assets is now considered a professional goal. The Indian believes that the last piece of dominoes to fall can be a reliable criterion:
Now that guardianship and regulatory barriers are slowly starting to disappear, what could prevent financial advisors from widespread adoption of cryptocurrencies may be the perception that “ credit standards ” remain a problem in allowing assets to be included in client portfolios. ”
Jeffrey Wang, president of Amber Group, a US-based cryptocurrency startup founded by former Morgan Stanley, Goldman Sachs and Bloomberg professionals, believes that independent advisors have more freedom to diversify into digital currencies than large banks.
“I think it will be a big obstacle for consultants working for companies owned by large banks to offer cryptocurrencies that are not in the form of exchange-traded ETFs [or] securities,” Wang said. “These banks are not smart enough to expand their money management offerings, especially in relation to cryptocurrencies not listed on the exchange.”
“There is a huge commitment for these companies / banks to be able to add cryptocurrency offerings when it comes to leveraging existing risk management systems, infrastructure, compliance, legal and trading systems so that a decision is not made without a lot of work. and due diligence. ”
While the institutional adoption of digital assets is still in its infancy, many investors and companies have made great strides in acquiring bitcoin. Bitcoin is owned by legendary investors Paul Tudor Jones and Stanley Druckmiller. On the part of the company, MicroStrategy and Tesla acquired Bitcoin for billions of dollars to hedge against devaluation.