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Bitwise Asset Management, the world’s leading crypto index fund manager, and VettaFi, a leading data-driven ETF platform, released the results of their annual survey on Wednesday, which showed that 15% of financial advisors reported allocating to crypto in their client accounts over the past year. This figure is roughly equivalent to last year’s result of 16%, and notably better than the results in 2020 (6%) and 2021 (9%).
Ninety percent of those surveyed indicated that they had received inbound questions from clients about the asset class. The most common question was: “Should I consider an investment in crypto?”
The survey also found that 59% of advisors have clients who independently invest in crypto outside of their advisory relationship. This is largely due to a lack of access since only 29% of advisors reported that they are able to buy crypto in client accounts, while the other 71% are blocked from doing so by company policy.
“The survey is a reminder that crypto is one of the best business development opportunities in the financial advisor market,” said Matt Hougan, Chief Investment Officer for Bitwise Asset Management.
Among those who are able to purchase crypto for clients, 52% are currently actively allocating on behalf of clients.
The biggest barrier to recommending crypto to their clients was regulatory uncertainty, with 65% of advisors claiming this was an obstacle to greater crypto adoption. “Ongoing debates over asset categorization, agency purview, and tax reporting requirements are both a natural outgrowth of crypto’s growing presence and a barrier to greater adoption,” the report said.
“Better regulation” was identified by 75% of advisors as a critical step towards improving their confidence in allocating to crypto, up from 55% the year before.
Overall, the financial advisors surveyed hold a bearish view of the crypto market in the short term but remain bullish long-term. Sixty-three percent of respondents indicated that they expect the price of BTC to fall in 2023, but 60% think that it will be higher in five years.
The volatility witnessed in 2022 has done little to dissuade those who are already invested in crypto, as 78% of advisors who currently have an allocation in client accounts plan to either maintain or increase that exposure in 2023.
“Advisors and their end clients continue to want to learn more about crypto investments despite the volatility incurred in 2022,” said Todd Rosenbluth, Head of Research for VettaFi. “For those with a long-term focus, interest remains high.”
When it comes to what products advisors were most interested in allocating to in 2023, crypto equity ETFs that hold multiple crypto stocks were the top choice (25%), followed by individual crypto assets like Bitcoin (17%), diversified crypto asset funds (10%), and individual crypto stocks (4%).
Breaking it down by areas of interest, Bitcoin and Ether received the most attention, with 41% and 20% of advisors selecting them as their areas of greatest interest, respectively. Interest in the major sectors of the crypto market was fairly evenly distributed, with 16% expressing interest in DeFi, 12% for crypto stocks, and 11% for Web3 and the Metaverse.
“As the dust from the past year settles and advisors size up the investment landscape for 2023, we see the onward march of crypto’s transformative potential as a compelling investment option and a unique business development opportunity for financial advisors and institutional investors,” the report concluded.
Over 400 financial advisors responded to the survey, including independent registered investment advisors, broker-dealer representatives, financial planners, and wirehouse representatives from across the U.S. This is the fifth consecutive year that Bitwise and VettaFi have partnered on the survey.
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