When the closing bell on 2021 sounds in a few weeks, one of the prime takeaways from the year in investing will be cryptocurrency.
As in the continued adoption and evolution of this still young asset class. Advisors are getting hip to this trend. If the steady stream of client inquiries regarding bitcoin and other digital assets wasn't enough, there's further confirmation this asset class isn't going anywhere.
If anything, the “new normal” for advisors is that while they don't need to be crypto experts, they should at least be conversant in and somewhat knowledgeable of digital assets because clients want exposure and that trend is only likely to grow stronger with time.
In the essence of making life easy on both advisors and clients, bitcoin is the place to start. After all, it's largest digital coin and data confirm it's on more investors' radar.
Confirmation Bitcoin Aptitude Is Important
Advisors demanding further confirmation that bitcoin need not look any further than the recently released, third annual Grayscale Bitcoin Investor Study.
For advisors, one of the key takeaways in the study is that 55% of bitcoin owners polled got involved in the asset for the first time this year. Add to that, 26% of Americans now own bitcoin. Those two data points indicate significant opportunity for advisors to guide clients on their crypto journeys. If they don't, someone less adept and less scrupulous will and the results could be troubling.
Adding to the importance of advisors in the bitcoin equation is the fact that many investors are actually buying and holding (HODLing) bitcoin. That's a plus, but clients approaching bitcoin for the long-term still need guidance.
“Most of these investors are “hodling,” with approximately 66% of those who purchased Bitcoin more than 12 months ago still owning it today,” according to Grayscale. “Of the investors who have sold, 91% have sold at least some Bitcoin at a profit. Even with the rise of market segments and use cases, such as decentralized finance (DeFi) and non-fungible tokens (NFTs), Bitcoin still accounts for 46% of the total value of crypto markets.”
Further cementing the notion that advisors need to be hip to bitcoin is that 59% of those polled by Grayscale say they would definitely or probably consider a bitcoin-related investment product. That's up from 36% in 2019. That data is highly relevant at a time when bitcoin exchange traded funds are finally coming to market in the U.S.
Bitcoin's “staying power has only increased as investor sentiment has shifted,” adds Grayscale. “Of those investors whose view of Bitcoin has changed over the past 12 months, nearly one-third (29%) of them say that they have a somewhat more favorable view in 2021, while 15% say they see Bitcoin in a much more positive light.”
As advisors know, one of the most argued points regarding bitcoin is whether or not it's a store of value, a la gold or stocks. This debate can go on and on, but the reality is, investors increasingly view bitcoin as an investment, not a currency.
“This year, however, three times as many investors would consider owning Bitcoin as a store-of-value investment, rather than as a currency. Among them, more than one-third (37%) perceive Bitcoin as a short-term investment to hold for less than one year through which they can earn a 'quick buck,'” notes Grayscale.
Bottom line: There are certainly some encouraging trends in the bitcoin space in terms of how clients view the asset. Reduced short-termism stands out as a prime example, but it's on advisors to help them take the next steps in terms of proper allocation and risk levels.