Despite concerns about volatility and regulation, investors have an increasing interest in adding Bitcoin and other cryptocurrencies to their portfolios.
In an annual survey of financial advisors’ attitudes toward crypto, conducted by crypto asset manager Bitwise and investment news and education resource ETF Trends, advisors report receiving more questions about cryptocurrency investing in 2021. They're also advising more clients to invest in this asset class.
Increasing interest and speculation
According to a separate survey from Huobi, 68% of people who own crypto made their first purchase in 2021. Plus, signs are indicating that investors will increase the percentage of their own portfolios allocated to digital currency.
Here's what advisors reported seeing in 2021:
- 94% say their clients had questions about crypto in 2021, versus 81% in 2020
- 67% say their clients are now investing in crypto on their own, compared to just 36% in 2020 and 35% in 2019
Bitcoin, the most commonly used cryptocurrency, topped a price of $65,000 per coin in 2021. Today it’s the most popular coin for crypto investors — according to the Bitwise survey, 72% of those who have crypto invest in it. Following at a distant second is Ethereum (50%), while only 16% invest in other kinds of coins.
When asked how they believe the price of Bitcoin will change, advisors had this to say:
- 52% believe Bitcoin will reach $70,000 within the next year
- 53% believe the price of Bitcoin will exceed $100,000 within five years
However, as both individuals and investors take more interest in cryptocurrency, there may be a knowledge gap on both sides. According to the Huobi survey, 50% of adults go to social media for crypto information and 41% rely on web searches.
Surprisingly, just 29% of advisors in the Bitwise survey report that social media is their source on the topic, and 17% say they learn from friends and family. But in contrast to clients, their top sources for education include crypto companies (46%) and traditional media (47%).
Crypto volatility still a concern
If Bitcoin prices are a signal of what's to come, investors can expect more volatility. The currency saw a nearly 50% rise in price during 2021, but also saw decreases of 39% and 23% — both advisors and clients seem wary of what the future could bring.
Here's what survey respondents say:
- 60% consider "regulatory uncertainty" to be a potential obstacle to further crypto investment, versus 52% in 2020
- 53% of respondents express concern about volatility, compared to 38% in 2020
Still, despite concerns, more advisors are voting for this asset class with their own dollars. Almost half of all advisors (47%) report having owned crypto assets in their personal portfolios in 2021 — versus just 24% in 2020. Bitwise notes that, in the past, crypto allocation in advisor accounts is often a sign that clients will follow suit.
Methodology: Bitwise and ETF Trends conducted this survey of 619 U.S.-based financial advisors, inquiring about cryptocurrency assets and how they’re used in their clients’ portfolios. Survey respondents included independent registered investment advisors, broker-dealer representatives, financial planners and wirehouse representatives. Outreach began in December 2021.