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Advisors Increasingly Allocate to Crypto, Clients Will Follow Says Bitwise CIO
- At a finance summit, 70% of advisors showed interest in crypto, a significant increase from previous years.
- Despite their own crypto investments, few advisors report similar allocations for their clients.
- Bitwise’s Matt Hougan predicts client crypto investments will rise soon, following advisor trends with a 6-12 month lag.
- A shift towards crypto in traditional finance suggests wider adoption ahead.
Institutional interest in crypto has truly arrived in 2024. We’ve seen spot Bitcoin and Ethereum exchange-traded funds (ETFs) start trading in the US and Hong Kong, and new funds in Australia too, of course.
In the US, large pension funds and other cashed-up fund managers have started allocating into Bitcoin, albeit through these ETFs. And banks are increasingly interested in crypto custody management, as seen in the recent case of BNY Mellon.
Related: Analysts Warn of Potential Crypto Consolidation; Some Suggest Harris Could Boost Bitcoin
And there are recent reports out of China, which suggest that the Middle Kingdom is seeing increasing demand for over-the-counter (OTC) trading as the country tries to fight off an impending deflationary spiral.
Hands Up, Please!
According to Matt Hougan, the Chief Investment Officer at Bitwise, the trend of institutional and high-net-worth individuals pouring funds into crypto is just getting started.
He explained that during a recent event, the Barron’s Advisor 100 Summit, he received some interesting feedback when measuring the audience’s crypto appetite. According to Hougan, past events showed that among the audience – mainly financial advisors – about 10-20% were invested in crypto; this number recently skyrocketed.
When I asked this question to the same crowd two years ago, only a few people raised their hands—maybe 10 or 20%. Last year, it was much the same. This year, nearly every hand in the room went up. I don’t have an exact count, but I’d estimate at least 70% of the advisors in the room raised their hands.
Matt Hougan, Bitwise Hougan says there’s a technical term for that:
There’s a very sophisticated technical word that economists use for this kind of year-over-year phenomenon: whoa.
Matt Hougan, Bitwise Client Allocation Lags Behind by 6-12 Months
Interestingly, Hougan asked the room of advisors about their clients, and not surprisingly a completely opposite picture. While a majority of these finance professionals now hold crypto, according to Hougan, few of their clients do – but that’s going to change, he believes.
Additionally, he points out that a lot of these advisors work for broker-dealers which currently don’t allow allocating client funds into spot Bitcoin ETFs.
Related: Investor Demand Ramps Up BlackRock Pressure on Coinbase for On-Chain Bitcoin Handling
When I asked the same room how many of them had allocations to bitcoin in client accounts, very few kept their hands raised. […] Advisors virtually always allocate first in their personal accounts. Client allocations typically follow 6 to 12 months later.
Matt Hougan, Bitwise Hougan added that it’s easy to forget that this is still a sector in the growth stages, especially given all the recent institutional adoption and interest. More importantly, professionals in trad-Fi are finally making a move toward the crypto industry, with interest further spreading from there.
More than anything, what I took from the event is that a wave of the most powerful people in finance are finally allocating to crypto. When it spreads from them to their clients, things could get interesting quickly.
Matt Hougan, Bitwise Get the most important crypto news delivered to your inbox by subscribing to the CNA newsletter
Author
Aaron Feuerstein
Aaron Feuerstein is a freelance writer based in Melbourne. His focus is on decentralised finance and the regulatory space surrounding blockchain. He holds a Master's in Accounting. When he is not studying the latest legal case, he enjoys his time as a modest but eager hobby cook.
