Bitcoin Just Hit a Record High. What Financial Advisors Think of Crypto Now.
Bitcoin has soared to record highs since the election, gaining more than $25,000 in value and surpassing $94,000 per coin. The broad digital currency market has followed suit. Factors driving the rally include president-elect Trump’s pro-crypto stance, anticipation of a more crypto-friendly regulatory environment under his administration, and the election to Congress of more crypto-friendly lawmakers.
In recent years most financial advisors we’ve spoken to have been cool to the idea of recommending Bitcoin and other crypto investments to clients, describing the asset class as a highly speculative one that should comprise a few percentage points at most in client portfolios. For this week’s Big Q, we thought we’d check in, once again asking: What is your take on Bitcoin and other cryptocurrencies for client portfolios?
iMichael Durso, CEO and chief investment officer, ShoreHaven Wealth Partners: We’ve owned Bitcoin as well as some other cryptocurrencies in client accounts since 2021. It isn’t for every client, and we’re certainly not looking to put 50% of a client’s net worth in it—we try to keep it to between 1% and 5% of investible assets. But where it’s made sense from a risk and time frame standpoint, we’ve used it. And for clients who believe in the technology and believe in the use cases for digital assets, we wanted to have the best possible option to get exposure in the portfolio. Our clients own digital assets through the separately managed account structure that Eaglebrook Advisors supplies us.
I’m not going to make price predictions, but it looks positive from the standpoint of the environment and the type of investors that are now entering the asset class. I think back to everything that was going on a few years ago with FTX [the failed digital currency exchange] and all the negative headlines, when Bitcoin was around $10,000 and you didn’t know which direction it was going to go. That was a bad stain on the industry, but the fact that it was able to weather that storm and continue to move higher is important. And now you see firms like BlackRock putting out ETFs, and a lot of these big institutional players entering the market. I think that suggests that it’s an asset class that will stay around and should trend higher.
Ken Robinson, founder, Practical Financial Planning: The short answer is that I would not recommend it. If a client happens to have some, I would encourage them to limit it to no more than anything else that we would consider a speculation. Accepting that cryptocurrency is a kind of currency means that investing in it depends on whether it makes sense to invest in currencies at all. And the enormous majority of households should not be investing in currency. In fact, when we talk about exchanging money for currency of another country, we don’t talk about currency investing, we talk about currency speculation. If a client hasn’t been actively engaged in trading sovereign currencies, in trading U.S. Dollars or yen or euros, for example, then why are they suddenly experts in trading a currency that isn’t even issued by a sovereign state?
What makes currency worth something is everybody agreeing that it’s worth something. And that needs to be an enormous group of people for the value to not have significant swings. And if there are significant swings up, there can be significant swings down. If we want it to be money, then it should be more stable than that. On the other hand if we want it to be an investment, it should have some kind of intrinsic value, like a company that has a proven stream of revenue, or a mutual fund that has / that is made up of a bunch of companies. Cryptocurrency has none of that. And not only that, but you’re trading currency that appeals to felons. Maybe it isn’t intentionally designed that way, but it’s the preferred way to pay people who invade your computer and lock you out of it.
Jamie Hopkins, CEO of Bryn Mawr Capital Management: In a book I published in 2016, I recommended that you put 1% into Bitcoin or Ether, and so far that has / that is played out to be a relatively prudent approach. Here at Bryn Mawr, we did due diligence on some funds, and while we don’t recommend a high allocation, clients can say hey, I really want to be in this. There’s some documentation they sign, and we’ll allocate to it. There is still a large portion of the clientele that we service who say, I don’t ever want to be in this, I don’t believe in it. And you don’t want to put any client into investments that don’t align with how they view the world.
The challenge I see around crypto in portfolios is how to reallocate over time. After the election we saw Bitcoin go way up. If your allocation is now, you know, 2.5% or 3%, that has / that is actually a lot. And it would probably trigger a reallocation. The challenge is, do you really want to go to clients and say, “Hey, Bitcoin is doing well so we’re going to sell you out of it.” It’s a little bit of an odd stance. But when regulators come in to look, they’ll want to know if you’ve been in compliance with your stated standards.
Ryan Bond, wealth manager, Savvy Advisors: In the past, I’ve been quite bearish on crypto as a whole. I would say my position has gotten a lot warmer over the past couple of years, especially as of late, with some of the expectations surrounding a Trump presidency. Obviously, crypto has done exceptionally well over the past decade. But there has been so much volatility surrounding it. And many of my clients are more focused on the longer term and aren’t getting caught up in the short-term hype with some of these flashy asset classes.
For my clients who do hold crypto, and I’d say it’s about 15% of my client base, we have transitioned most of it into ETF holdings within our portfolios themselves. But even where we do have crypto allocations, we’re not constantly trading them. We’re looking at it as another long-term piece of the portfolio versus something that we might hold for a few months.
If you are trying to buy crypto, now is probably not the time. Why would we want to buy something at its highest point ever? I tell my clients who are interested in crypto, let’s keep an eye on things. If there’s a better buying opportunity within the next year or so, we might be able to allocate a little more there. But we’re doing things within our portfolios that are hopefully already adding enough alpha that people aren’t trying to chase these extremely speculative asset classes.
Mike Bisaro, president and CEO, StraightLine: We have never been completely for or against cryptocurrencies. We always believed that it needed to be treated primarily as a speculative asset. There’s nothing wrong with speculative assets as long as you know that you are speculating. A lot of people went into Bitcoin full-bore and some did well while others got destroyed when it pulled back, especially in that big wave at the beginning of 2022.
We do have some clients who own crypto, but we have not formally adopted it in our portfolios in any kind of across-the-board way. We’ve been thinking about it all along, but the movements in the past week and a half or so are based on an expectation of perhaps a more friendly SEC, more clarity on regulations, perhaps even more clarity on tax treatment.
What happened in January with the Bitcoin ETFs [the SEC approved spot Bitcoin ETFs] increased its legitimacy. It’s more institutionalized now and just easier for people to access. So we have been looking at this again as the context has changed a bit. We are still very much in the camp that if it is to be used, it should be a small percentage of the portfolio.
Meet
Ryan Bond
Hi there 👋🏼 I'm Ryan, a senior financial advisor, and CERTIFIED FINANCIAL PLANNER™ at Savvy. With over eight years of experience in the field, I have worked with renowned firms like Morgan Stanley, Pennington Partners, Vanguard, and Personal Capital. Now, I am thrilled to be part of the dynamic Savvy team.
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Bitcoin Just Hit a Record High. What Financial Advisors Think of Crypto Now.
Bitcoin has soared to record highs since the election, gaining more than $25,000 in value and surpassing $94,000 per coin. The broad digital currency market has followed suit. Factors driving the rally include president-elect Trump’s pro-crypto stance, anticipation of a more crypto-friendly regulatory environment under his administration, and the election to Congress of more crypto-friendly lawmakers.
In recent years most financial advisors we’ve spoken to have been cool to the idea of recommending Bitcoin and other crypto investments to clients, describing the asset class as a highly speculative one that should comprise a few percentage points at most in client portfolios. For this week’s Big Q, we thought we’d check in, once again asking: What is your take on Bitcoin and other cryptocurrencies for client portfolios?
iMichael Durso, CEO and chief investment officer, ShoreHaven Wealth Partners: We’ve owned Bitcoin as well as some other cryptocurrencies in client accounts since 2021. It isn’t for every client, and we’re certainly not looking to put 50% of a client’s net worth in it—we try to keep it to between 1% and 5% of investible assets. But where it’s made sense from a risk and time frame standpoint, we’ve used it. And for clients who believe in the technology and believe in the use cases for digital assets, we wanted to have the best possible option to get exposure in the portfolio. Our clients own digital assets through the separately managed account structure that Eaglebrook Advisors supplies us.
I’m not going to make price predictions, but it looks positive from the standpoint of the environment and the type of investors that are now entering the asset class. I think back to everything that was going on a few years ago with FTX [the failed digital currency exchange] and all the negative headlines, when Bitcoin was around $10,000 and you didn’t know which direction it was going to go. That was a bad stain on the industry, but the fact that it was able to weather that storm and continue to move higher is important. And now you see firms like BlackRock putting out ETFs, and a lot of these big institutional players entering the market. I think that suggests that it’s an asset class that will stay around and should trend higher.
Ken Robinson, founder, Practical Financial Planning: The short answer is that I would not recommend it. If a client happens to have some, I would encourage them to limit it to no more than anything else that we would consider a speculation. Accepting that cryptocurrency is a kind of currency means that investing in it depends on whether it makes sense to invest in currencies at all. And the enormous majority of households should not be investing in currency. In fact, when we talk about exchanging money for currency of another country, we don’t talk about currency investing, we talk about currency speculation. If a client hasn’t been actively engaged in trading sovereign currencies, in trading U.S. Dollars or yen or euros, for example, then why are they suddenly experts in trading a currency that isn’t even issued by a sovereign state?
What makes currency worth something is everybody agreeing that it’s worth something. And that needs to be an enormous group of people for the value to not have significant swings. And if there are significant swings up, there can be significant swings down. If we want it to be money, then it should be more stable than that. On the other hand if we want it to be an investment, it should have some kind of intrinsic value, like a company that has a proven stream of revenue, or a mutual fund that has / that is made up of a bunch of companies. Cryptocurrency has none of that. And not only that, but you’re trading currency that appeals to felons. Maybe it isn’t intentionally designed that way, but it’s the preferred way to pay people who invade your computer and lock you out of it.
Jamie Hopkins, CEO of Bryn Mawr Capital Management: In a book I published in 2016, I recommended that you put 1% into Bitcoin or Ether, and so far that has / that is played out to be a relatively prudent approach. Here at Bryn Mawr, we did due diligence on some funds, and while we don’t recommend a high allocation, clients can say hey, I really want to be in this. There’s some documentation they sign, and we’ll allocate to it. There is still a large portion of the clientele that we service who say, I don’t ever want to be in this, I don’t believe in it. And you don’t want to put any client into investments that don’t align with how they view the world.
The challenge I see around crypto in portfolios is how to reallocate over time. After the election we saw Bitcoin go way up. If your allocation is now, you know, 2.5% or 3%, that has / that is actually a lot. And it would probably trigger a reallocation. The challenge is, do you really want to go to clients and say, “Hey, Bitcoin is doing well so we’re going to sell you out of it.” It’s a little bit of an odd stance. But when regulators come in to look, they’ll want to know if you’ve been in compliance with your stated standards.
Ryan Bond, wealth manager, Savvy Advisors: In the past, I’ve been quite bearish on crypto as a whole. I would say my position has gotten a lot warmer over the past couple of years, especially as of late, with some of the expectations surrounding a Trump presidency. Obviously, crypto has done exceptionally well over the past decade. But there has been so much volatility surrounding it. And many of my clients are more focused on the longer term and aren’t getting caught up in the short-term hype with some of these flashy asset classes.
For my clients who do hold crypto, and I’d say it’s about 15% of my client base, we have transitioned most of it into ETF holdings within our portfolios themselves. But even where we do have crypto allocations, we’re not constantly trading them. We’re looking at it as another long-term piece of the portfolio versus something that we might hold for a few months.
If you are trying to buy crypto, now is probably not the time. Why would we want to buy something at its highest point ever? I tell my clients who are interested in crypto, let’s keep an eye on things. If there’s a better buying opportunity within the next year or so, we might be able to allocate a little more there. But we’re doing things within our portfolios that are hopefully already adding enough alpha that people aren’t trying to chase these extremely speculative asset classes.
Mike Bisaro, president and CEO, StraightLine: We have never been completely for or against cryptocurrencies. We always believed that it needed to be treated primarily as a speculative asset. There’s nothing wrong with speculative assets as long as you know that you are speculating. A lot of people went into Bitcoin full-bore and some did well while others got destroyed when it pulled back, especially in that big wave at the beginning of 2022.
We do have some clients who own crypto, but we have not formally adopted it in our portfolios in any kind of across-the-board way. We’ve been thinking about it all along, but the movements in the past week and a half or so are based on an expectation of perhaps a more friendly SEC, more clarity on regulations, perhaps even more clarity on tax treatment.
What happened in January with the Bitcoin ETFs [the SEC approved spot Bitcoin ETFs] increased its legitimacy. It’s more institutionalized now and just easier for people to access. So we have been looking at this again as the context has changed a bit. We are still very much in the camp that if it is to be used, it should be a small percentage of the portfolio.
Meet
Ryan Bond
Hi there 👋🏼 I'm Ryan, a senior financial advisor, and CERTIFIED FINANCIAL PLANNER™ at Savvy. With over eight years of experience in the field, I have worked with renowned firms like Morgan Stanley, Pennington Partners, Vanguard, and Personal Capital. Now, I am thrilled to be part of the dynamic Savvy team.
