Matt Murphy, CFA, SVP of Distribution for Grayscale, and Ric Edelman, Founder of DACFP, joined Julie Cooling, Founder and CEO of RIA Channel, to discuss how bitcoin and digital assets are becoming a normal part of asset allocation processes.
Edelman makes the case for adding bitcoin to an investment portfolio, citing 15 years of performance data that show an allocation increases returns and reduces risk. The low correlation of bitcoin returns to other risk assets increases diversification. Fewer advisors today are hesitant to consider bitcoin for client portfolios, as banks and asset management firms continue to adopt the asset class and introduce new investment products. With the launch of ETFs and pro-crypto legislation in Congress, it is easier to allocate to digital assets today than ever before. Advisors are racing to catch up to their clients’ knowledge of crypto assets.
Pension and endowment funds are intensely researching crypto investments, but new allocations are adopted slowly, often taking up to eight quarterly meetings to approve allocations to a new asset class.
Murphy notes that advisor demand for crypto assets is stronger than ever. Advisors are realizing that their clients already own crypto assets that could be onboarded to asset management products. Platforms and advisory firms are increasingly normalizing it as an asset class, adding crypto to their product lineups and manager research coverage.
Edelman states that many advisors are now recommending allocations of 4% to 5%, with 10% allocations becoming more common. As investors increasingly allocate to technology assets such as the Magnificent 7 stocks, it is natural to broaden the definition of tech investments to include crypto, which has been the highest-performing asset in the sector.
With ten years of operating experience in digital assets, Grayscale is a leader in providing educational resources for advisors. The Grayscale team hosts due diligence and educational events nationwide with subject-matter experts and is available to meet with advisors at their offices.
DACFP offers advisors opportunities to become Certified in Blockchain and Digital Assets through the CBDA credential program. The online, self-study course offers advisors 18 continuing education (CE) credits. In addition to technical knowledge, the course covers practice management topics, including taxes, portfolio construction, and client communication.
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