2022 was a terrible year for crypto by all accounts, but this isn’t likely to be a long-term trend at BanklessTimes.com reports. More than 400 financial advisors took part in an annual survey, and while almost two-thirds stated Bitcoin’s price would decline this year, 60% thought it would be higher in five years.
Allocation is stable in spite of market volatility
Crypto allocation remained stable despite market volatility, with 15% of respondents reporting they allocated crypto in client portfolios over the past year. That’s about the same as last year (16%), and far ahead of 2021 (9%) and 2020 (6%).
Once invested, you maintain exposure
Despite “crypto winter”, four out of five advisors who have allocated crypto in client accounts intend to keep or even increase that exposure in 2023. What’s more, investors have not lost interest in digital assets. The most common question advisors received from clients last year was whether the latter should consider an investment in crypto.
Crypto remains a big financial opportunity
More than half of advisors said all or some of their clients were making independent investments in crypto. This can translate to a major business opportunity.
Crypto equity ETFs are a top choice in terms of exposure
Advisors are most interested in crypto equity ETFs in terms of exposure in 2023. They accounted for a quarter of the total, ahead of Bitcoin (17%) and other individual assets, and diversified crypto asset funds (10%).
Obstacles
The survey revealed two obstacles to the broader adoption of crypto: access and regulatory uncertainty. Less than a third of advisors said they could purchase crypto in client accounts. Among that subset, just over half currently allocate on behalf of customers, showing how critical access is.
The bigger barrier is regulatory uncertainty. Two-thirds of advisors claimed this impeded wider crypto adoption. Ongoing debates over tax reporting requirements, regulatory control, and asset categorization are an obstacle to greater adoption and a natural consequence of crypto’s growing presence.
75% of respondents identified better regulation as a crucial step towards building confidence in allocating to crypto. This is an increase from last year’s survey which was 55%.
Respondent profile
Just under half of all respondents (47%) were independent RIAs. The rest are broken down as follows:
- Independent broker-dealer reps (25%)
- Financial planners (17%)
- Full-service broker-dealer reps (7%)
- Institutional investors (3%)
2022’s survey had a similar breakdown in respondents. In 2023, Bitwise included institutional investors to include a higher number of professional investors.
AUM
On average, a surveyed advisor had assets under management (AUM) worth $50 - $100 million, but assets were distributed evenly. Almost an equal number had either more than $100 million (42%) or less than $50 million in AUM (40%). Only 11% had assets worth over a billion.
The percentage of respondents whose personal portfolios included crypto assets dropped from 47% in the 2022 survey to 37%. However, this was still much higher than in the previous two years (24% in 2020 and 17% in 2019).
The group most likely to own crypto personally was institutional investors. 64% of investors had personal holdings compared to RIAs (39%), financial planners (34%), independent broker-dealers (37%), and full-service broker-dealers (17%).
The future of crypto
The crypto market is far off from 2021 levels, when it recorded an all-time high. In fact, some have said “crypto winter” is putting it mildly; crypto ice age might be more appropriate. Still, crypto isn’t going anywhere, the market is simply transforming. When the dot-com bubble burst about two decades ago, companies with sustainable business models came to own the future of the internet. Likewise, 2022 may mark the transfer of blockchain infrastructure and crypto technology to steadier hands.
To probe crypto’s staying power, we would be wise to watch major banks and financial institutions’ actions. JPMorgan CEO and chair Jamie Dimon famously said he would fire any staff member if he found they were trading in cryptocurrencies. However, the bank did an about-face, launching the JPM Coin, its own cryptocurrency.
In 2023 and beyond, the market might see crypto technology handed to more established and better-regulated institutions.
Crypto and blockchain will always be integral components of the modern economy. Embracing crypto technology is inevitable. Despite its downsides, this technology will remain a force to be reckoned with in global finance.Jonathan Merry, CEO of BanklessTimes.com
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