Nasdaq: Financial Advisors Want Bitcoin Allocation
- A survey of 500 financial advisors saw 72% desiring to invest more into the bitcoin and broader cryptocurrency sector if a bitcoin spot ETF was approved.
- Those surveyed are already invested into bitcoin or other cryptocurrencies, or are highly considering allocation to the asset class.
- Less than 9% of advisors are confident in their ability to expertly advise clients within the asset class, denoting an educational gap between traditional finance and an emerging monetary system.
In a Nasdaq survey of 500 financial advisors whom are already allocated or consider allocation towards bitcoin and other cryptocurrency-based products, 72% would invest more heavily into the space if a spot exchange-traded fund (ETF) was approved, according to a press release sent to Bitcoin Magazine detailing the results.
“Over the last decade, financial advisors have been focused on shifting assets into index funds,” said Jake Rapaport, head of digital asset index research for Nasdaq, per the release. “As they incorporate digital assets into their investment strategies, they are expressing strong interest in a similar vehicle that can offer broad asset class exposure for their clients.”
Financial advisors, both retail and institutional, are taking a broader interest in Bitcoin and other cryptocurrencies. While this is true, it is important to keep the correct perspective in mind as these conversations evolve.
According to a January survey from Bitwise, one of the largest cryptocurrency managers in the world, financial professionals allocating to bitcoin and other products had risen to 15%, up from 9% in the previous year. These numbers lend to a responsible expectation of adoption for financial professionals as they show we still have quite a long way to go. However, continuing to look at those already allocated to the space still provides immense value.
Nasdaq’s survey found that 86% of advisors who pre-allocated to bitcoin or other cryptocurrencies plan to increase allocation over the next 12 months, while none of them intend to subtract from their portfolios. Of the same sample class, 50% are already using bitcoin-based ETF futures and another 28% intend to within 12 months.
As this survey only represents a small portion of financial advisors, it is still undeniable that professionals entering the space quickly discern value for their investors and latch on for the long haul. Despite the favorable terms understood by financial advisors allocating to bitcoin and other cryptocurrencies, there still remains much doubt to the hope a spot ETF will be approved this year.
While 7% of those surveyed are unsure of spot ETF prospects being successful in 2022, 38% find it likely to succeed, 31% expect failure, and 24% of those surveyed held a neutral stance.
The lack of confidence for a spot ETF approval should serve as a signal to those unallocated to bitcoin as the demand for those already investing only grows by the day, likely looking to take first-mover advantages over those slower to adoption.
Of those surveyed, registered investment advisors (RIAs) represent 34% of the user base, whereas 19% are held by independent broker-dealers and another 17% by wirehouse advisors. Only 7% listed environmental, social, and governance (ESG) as an important criteria for investment strategies, 10% felt knowledgeable about bitcoin and other cryptocurrencies, and only 9% felt confident in their advisory capabilities. An overwhelming majority (98%) expressed a desire to further their education in the broader cryptocurrency space.
It’s important to reiterate that only 9% of those surveyed feel confident in their ability to advise towards bitcoin and other cryptocurrencies. As noted above, this is a smaller percentage of the total financial advisory ecosystem, yet, of those involved, less than one out of every 10 advisors feels like they know what they are doing.
“Crypto inflows through advisor channels show no signs of stopping, even as advisors grapple with compliance considerations and look for guidance from educational materials from other industry participants, including asset managers and index providers,” Rapaport said. “We expect ESG and crypto considerations to converge as investors continue to direct assets into both.”
As traditional finance tries to embed itself amongst an emerging system, financial advisors still have a lot to learn. The educational gap, however, does not seem to be slowing down attempts to cash-in on the gains of the bitcoin ecosystem.
“The vast majority of advisors we surveyed either plan to begin allocating to crypto or increase their existing allocation to crypto,” Rapaport said. “As demand continues to surge, advisors will be looking for an institutional solution to the crypto question that now dominates client conversations.”