Date: April 11, 2022

Advisors who have been testing the waters with cryptocurrency investments have no plans to abandon the asset class, according to a new survey from Nasdaq.

In a poll of 500 advisors who say they are already investing clients’ assets in crypto or considering doing so, 86% said they plan to increase those allocations over the next year, while no respondents indicated they are planning to decrease crypto holdings.

In excluding advisors who aren’t interested in crypto, the survey does not speak to the large segment of advisors who remain skeptical about digital assets. And those who are on board with crypto appear to be taking a measured approach, with respondents settling on 6% of a typical client’s portfolio as an ideal cap for crypto allocations.

Advisors already in crypto reported that they are increasing their allocations as they approach that 6% figure, or plan to once they start investing in those assets. That shift suggests that at least some advisors are viewing digital assets as less of an outlier than they used to, and are interested in seeing some of the familiar product structures associated with traditional assets like equities and commodities—such as exchange-traded funds—develop around crypto.

“The vast majority of advisors we surveyed either plan to begin allocating to crypto or increase their existing allocation to crypto,” Jake Rapaport, head of Nasdaq’s digital asset index research, said in a statement. “As demand continues to surge, advisors will be looking for an institutional solution to the crypto question that now dominates client conversations.”

Although the survey limited its pool of respondents to advisors who have already warmed up to crypto—and are predictably bullish on the asset class—even those advisors acknowledge that obstacles remain, notably on the regulatory side.

In particular, the respondents expressed interest in ETFs that would track the spot prices of digital coins, giving investors easy exposure to these assets without having to go through the process of directly purchasing and securely storing them.

A handful of ETFs that invest in crypto futures have begun trading, but those are less than ideal compared to the spot-fund format favored by some crypto advocates, who have objected to the fees that the futures-based funds carry, as well as the imperfect correlation in those products between trading prices and the underlying assets themselves.

“Over the last decade, financial advisors have been focused on shifting assets into index funds,” Rapaport said. “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.”

Half of advisors surveyed say they are using a Bitcoin futures ETF for at least some of their crypto allocations, and another 28% say they plan to invest in a futures-based fund in the next year.

Source: No Buyer’s Remorse for Advisors Who Already Allocate to Crypto: Nasdaq