“Bitcoin is starting to become a reference asset for the younger generation,” said Anthony Pompliano, founder of Pomp Investments. “We know that most investors can't beat the benchmarks, so adding a new benchmark to your asset allocation is the only way to try to keep up.”
Bitcoin rose to the $49,000 level on Thursday, reaching levels not seen since December 2021, before falling to around $43,000 on Friday. It rose 150% last year after a brutal sell-off in 2022.
Large swaths of the investment world were absent from the 2023 rally. According to VanEck CEO Jan Van Eck, many agents, financial advisors and banks have been explicitly told in the past “not to touch cryptocurrencies,” largely due to their unregulated nature.
That changed on Wednesday after the Securities and Exchange Commission cleared spot sales of bitcoin ETFs, allowing investors to access bitcoin in the same way they buy stock and bond index funds. SEC Chairman Gary Gensler He continues to issue strict warnings When it comes to cryptocurrency investments, however, this does not hinder activity.
she has The box of alternatives chosen by a hundredfoldMutual fund manager Advisors Preferred Trust is investing up to 15% of total assets for indirect exposure to bitcoin through funds and futures, according to its latest prospectus.
“Most passive funds are looking for ways to increase performance,” Pompliano says.
Bitwise Asset Management is one of 11 issuers given initial approval for the Bitcoin product. Matt Hogan, chief investment officer, said: Bitwise Bitcoin ETFwhich offers the lowest fees of 0.2% of holdings, is primarily aimed at financial advisors and family offices.
“This includes regional investment agreements [registered investment advisors] “It ultimately includes money transfer companies — a multi-trillion-dollar market,” Hogan said, adding that advisers are “increasingly taking a 1% to 5% allocation.” “We know they are interested in cryptocurrencies, and we know they have been waiting for the ETF.”
In a recent survey of financial advisors conducted in conjunction with VettaFi, a data-driven ETF platform, Bitwise found that 88% of advisors interested in purchasing Bitcoin were waiting until after approval for an immediate Bitcoin ETF. Among advisors already invested in cryptocurrencies, large allocations (more than 3% of portfolio) more than doubled to 47% in 2023 compared to the previous year.
“For the vast majority of people, a low-cost bitcoin exchange-traded fund would be the easiest way to do that,” Hogan said.
According to data from Robinhood, 81% of the Bitcoin ETF's trading volume in the first week was in individual accounts, with the rest in retirement accounts.
Even before the SEC's announcement on Wednesday, it was CFA Institute Investor Confidence Study 2022 It found that 94% of state and local retirement plans had some exposure to cryptocurrencies. New products are likely to provide greater legitimacy and lower costs for retirement plans that want to increase allocations.
Financial companies offer different advice on how best to enter this field.
in a report On its website in October, Galaxy Digital said the “strongest marginal improvement” occurred when wallets moved from a 0% to 1% bitcoin allocation. Since 2019, Tree of wisdom He said that adding bitcoin to a portfolio traditionally composed of 60% stocks and 40% bonds “can improve the risk-return profile” and that from 2014 to 2019 “even a one percent allocation resulted in 8.3% outperformance versus the portfolio.” the basic”.
devotion Analyzed Performance through mid-2022 “Bitcoin has boosted portfolio returns during specific periods in the past, although it has also come with significant volatility,” he noted. The company said that bitcoin had not yet held up as a hedge against inflation, but acknowledged that “evaluating this has been difficult, given that inflation has been low throughout most of bitcoin’s history.”
The types of funds quickest to jump into the market are likely to be those focused on high-growth technology stocks, said Matt Walsh, founder of Castle Island Ventures, who previously led a number of Fidelity Investments' blockchain and crypto-asset initiatives. But he also sees broader appeal.
“I think you can also see that in commodity-based portfolios, like gold-based funds that view this as a type of digital gold,” Walsh said.
He watches: SEC approves Bitcoin ETFs
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