Industry Updates

Launching a crypto ETF would encourage advisors to invest, says Bitwise study

George Geddes

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Nearly 10 per cent of financial advisors include cryptocurrency in their clients' portfolios, according to a recent


released by Bitwise Asset Management and ETF Trends.

Cryptocurrency has been a hot topic in the ETF market recently, in particular Bitcoin, following the withdrawal of the Bitcoin ETF application by VanEck and Solid X last week in the US.

The survey questioned 151 financial advisors about the inclusion of cryptoassets within their own and their clients' portfolios. 64 per cent of the 151 advisors surveyed said the most appealing investment vehicle they would use to invest in crypto is an ETF. The next option was direct ownership of the individual coin with 21 per cent.

Alternatively, 42 per cent of advisors would prefer an actively managed fund. Only 35 per cent would be willing to choose a diversified index fund but the same figure would be more comfortable in investing in crypto following the launch of an ETF. This option was above "less volatility" which only 29 per cent said is a hindrance. Better regulation was the leading reason (54 per cent) as to why investors would feel more comfortable in investing in crypto.

There is still concerns over how reliable cryptocurrencies are as an investible asset. There remains a significant proportion of investors (43 per cent) which have no idea how to value cryptocurrencies. Just behind "lack of understanding" is concerns regarding regulation, with 42 per cent of investors saying this is preventing them from investing in crypto. Even 11 per cent believe crypto is still a scam.

Regulation within cryptocurrency remains a grey area but a recent consultation by the Financial Conduct Authority hopes to rectify this. The consultation will look to clarify which activities the FCA will regulate. The authoritative body issued its consultation paper last week and is asking for feedback by April 5.

The FCA acknowledges the growing number of consumers investing in crypto, all be it still small, and therefore the possible risks investors are being exposed to needs to be addressed. This includes the potential banning of the sale of derivatives linked to certain types of cryptoassets to retail investors.

According to Bitwise's study, nearly 80 per cent of advisors have received questions from clients regarding crypto, in the last 12 months. Whilst 14 per cent of advisors believe Bitcoin will be worth $0 in five years-time, the rest remain positive. Even 3 per cent are optimistic the value will balloon above $100,000. At the time of writing this article, the value of Bitcoin sits just above $3,400.


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