Cryptocurrencies have crawled out from the shadows and into the financial mainstream. This is thanks, primarily, to serious investors like Paul Tudor Jones, Tesla’s Elon Musk, and even Apple CEO Tim Cook. However, more conservative financial advisors and managers feel challenged by all the changes in their wake.
Most of the world’s financial experts still balk at dealing with clients who want to wade into the crypto pond. They are mainly concerned with how volatile cryptos have been performing in the global market, the push and pull of government and private sector regulation, and a sharp rise in cases of financial fraud.
Fintech company eMoney Advisor recently conducted a survey wherein they discovered that 43% of US investors have been putting their money into cryptocurrencies. Nevertheless, 38% are reluctant even to dip a toe into the waters, thanks to warnings from their financial advisors.
A similar survey conducted by Bitwise, a crypto investment management firm, noted that their clients had approached 94% of US advisors with crypto-centric inquiries back in January. Still, barely 15% put their money into digital tokens.
What’s Fueling the Trend?
The continued reluctance of investment advisors to encourage their clients to consider cryptos can easily be attributed to the incredibly volatile performance of cryptocurrencies in the global market.
The continuing absence of a Bitcoin-centric exchange-traded fund (ETF) directly linked to its spot price is another. The US Securities and Exchange Commission has yet to approve a spot ETF, even though several futures-linked funds have already gained the attention of potential investors. Indeed, several financial experts agree that spot ETFs would probably be the best way to make cryptocurrencies more palatable to their clients.
But Digital Asset Council of Financial Professionals (DACFP) founder Ric Edelman opines that waiting for a Bitcoin-ready ETF would be a serious mistake. Instead, he believes that investment advisors can dedicate a small portion of their clients’ portfolios to crypto assets and digital tokens between one and three percent.
Also, most cryptocurrencies and tokens are not regulated by any finance or investment-centric federal agency – at least, for now. It’s something that continues to spark debates, especially those regarding the regulation of the cryptocurrency sector. This lack of official regulation is one of the biggest reasons advisors advise their clients against investing in cryptos, particularly with the growing number of fraud cases related to bitcoin, Binance, and other cryptos.
But there may be a glimmer of hope on the horizon. Several advisors in the US are wisening up regarding cryptocurrencies, playing it safe by paying for a certificate with the DACFP to bolster the authenticity and legitimacy of the token their clients want to invest in.
