Many financial advisors remain wary of advising on crypto, but that might have to end.
The majority of American investors now own Bitcoin, more than a decade after the cryptocurrency first hit the market, according to a new report — albeit based on a small survey — by Unchained. Unchained is a financial services provider for Bitcoin.
Due to bitcoin’s decentralized nature, owners of cryptocurrency are hard to track. However, according to Grayscale, a digital asset manager and one of the world’s largest holders of Bitcoin, a significant majority of holders are small investors. According to the company, 74 percent of Bitcoin owners hold less than 0.01 worth of the currency. Additionally, the largest holders of Bitcoin are exchanges — like Binance and Robinhood — which represent millions of individual investors. According to 21Shares, one of the world’s largest issuers of crypto ETPs, the number of retail investors holding bitcoin has increased 11 percent from one year ago and about 34 percent compared to two years ago.
Unchained surveyed 402 U.S. residents between the ages of 18 and 78 who had a least one investment account. Thirty-nine percent of respondents were Millennials, 32 percent were Gen X, and 21 percent were Boomers. Seventy-one percent of respondents had at least $100,000 in investable assets.
According to the survey, 95 percent of investors who owned Bitcoin said they would buy or strongly consider buying more of the cryptocurrency in 2024. Additionally, nearly half of those who did not currently own Bitcoin at the time of the survey in October said that they would strongly consider buying it next year.
The majority of investors (79 percent) believe that Bitcoin will eventually reach a new all-time high above $69,000 (it’s now about $37,000), with about 55 percent of investors believing that will happen next year.
Among survey respondents, Bitcoin was selected by 34 percent of investors as the asset they believed would perform the best in 2024. This was followed by gold with 27 percent, the S&P 500 with 21 percent, and cash with 18 percent.
Despite Bitcoin’s growing prominence, an advising gap exists.
According to Cerulli Associates, a wealth management research and consulting firm, just 1 percent of advisors report that they use cryptocurrency for some of their clients based on their own recommendations. An additional 26 percent of advisors do not currently use or discuss cryptocurrencies with their clients but expect to do so in the future.
That means the majority of advisors do not use or discuss crypto with their clients and do not plan to do so in the future.
Part of the issue is the regulatory uncertainty surrounding crypto.
Over the last year, the SEC has cracked down on the crypto industry in a bid to tighten regulation and safeguard investors, in part due to the increase in crypto-related fraud and the collapse of prominent crypto exchanges. However, many in the industry believe that a bitcoin spot ETF is inevitable.
This month, Anchorage Digital, the first and only federally chartered crypto bank, launched its first custody and separately managed account offerings specifically for RIAs, helping provide another compliant way to custody digital assets.
Increased regulatory clarity, SEC approval of a Bitcoin spot ETF, and a potential U.S. recession were the top reasons that were most likely to affect an investor’s decision to buy Bitcoin. Forty-two percent of owners and 35 percent of non-owners said increased U.S. regulatory clarity would make them consider buying Bitcoin.
Additional rejections by the SEC of a Bitcoin spot ETF was the number one factor that would prompt an investor to decrease their Bitcoin holdings. In comparison, only 12 percent of all investors said they would decrease their position if their financial advisor or another trusted source told them to do so.
Twenty-six percent of people that don’t own Bitcoin said they would likely buy Bitcoin if their financial advisor or another trusted source recommended it.
