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Ultimate Resource For Financial Advisers By Financial Advisers On Bitcoin

A new Bitwise survey highlights a more favorable attitude toward Bitcoin and cryptocurrencies. Ultimate Resource For Financial Advisers By Financial Advisers On Bitcoin

Cryptocurrencies like Bitcoin (BTC) are increasingly being used by financial advisers as a hedge against inflation, underscoring the dramatic shift in institutional sentiment toward digital assets.

The “Bitwise/ETF Trends 2021 Benchmark Survey” reveals that 9.4% of financial advisers were allocating to cryptocurrencies in 2020 — an increase of 49% from the previous year. Of the advisers not currently allocating to crypto, 17% said they will either “definitely” or “probably” gain exposure in 2021.

Ultimate Resource For Financial Advisers By Financial Advisers On Crypto


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Advisers are buying crypto for many reasons, chief among them being its potential hedge against inflation. As Bitwise noted, 25% of advisers cited inflation-hedging as one of the most attractive features of the asset class. That’s up from just 9% the year before.


Ultimate Resource For Financial Advisers By Financial Advisers On Crypto

The Report Said:

“This year’s survey saw a sharp uptick in advisors highlighting crypto’s ‘high potential returns’ and its role in ‘inflation hedging’ as key attractive features of the asset class.”

A total of 994 advisers participated in the survey, up from 415 the year before. Independent registered investment advisers represented 45% of respondents, followed by independent broker-dealers (25%), financial planners (19%) and wirehouse reps (11%).

Bitcoin appears to be benefiting from the systemic devaluation of the dollar as more investors opt out of the traditional financial system. The dollar’s freefall is expected to continue this year as the incoming administration of Joe Biden preps a multitrillion-dollar stimulus plan, effectively picking up where Donald Trump left off.

Although institutions currently represent a small fraction of all Bitcoin holdings, their impact on the market is growing. Goldman Sachs executive Jeff Currie believes institutional uptake has put Bitcoin on the path to maturity but noted that more adoption is needed to stabilize the asset class.


Ultimate Resource For Financial Advisers By Financial Advisers On Bitcoin



Bitwise’s assets under management ballooned to $500 million in December 2020, a fivefold increase from just two months prior. The firm’s record inflows reflect new demand from investment professionals, including advisers, hedge funds and corporations.


Updated: 1-18-2021

Investment Icon Ric Edelman $230 Billion Assets Under Management Owns Bitcoin and Ethereum

Investment icon Ric Edelman, named the nation’s top independent financial advisor by Barron’s three times over, says he’s a believer and investor in cryptocurrency.

In a new interview with Real Vision, the founder of Edelman Financial Engines, which has more than $200 billion in assets under management, says he first began to tinker with crypto assets in 2014 as an experiment.

“I began with Bitcoin in 2014, and it was an academic exercise. I want to open up a Coinbase account, see how this works. I want to buy a Bitcoin and see and just learn. I did that for a bit of time and began to, as my research continued, my conversations with so many in the crypto space evolve, began to realize there really is a there there. This is not just a Beanie Baby.”

Since then, Edelman says he has grown his portfolio and invested in Ethereum.

“I increased our exposure with my wife, Jean, and expanded into Ethereum. I am as excited about that, frankly, as I am Bitcoin for totally different reasons, and this is something that – we are not talking about Coke and Pepsi. We are talking about two fundamentally different aspects of this technological revolution.


Ultimate Resource For Financial Advisers By Financial Advisers On Bitcoin

You can extend that to Ripple. The reason that a lot of these key coins exist is that they solve a problem that the others were facing. Bitcoin is not the end-all solution.”

Edelman cautions that many altcoins are destined for obscurity, and he has no plans to mine BTC due to the complexity involved.

“It has a huge head start. 70% market share on a brand that none of the others have, but there is a reason technologically for the existence of these other coins. A lot of them are nonsense, but some of them make sense. Recognizing the cumbersome element of buying coins themselves, I chose personally not to engage in mining, too time consuming. I am too busy in my day job with Edelman Financial Engines. I am not going to go there.”

Ric Edelman Says Bitcoin Now A Mainstream Institutional Investment

Ric Edelman, the investment icon who has been named the country’s top financial advisor by Barron’s three times over, says the conversations surrounding Bitcoin are doing a 180-degree turn as more institutions invest in the flagship cryptocurrency.

On an episode of SALT Talks, Edelman highlights that Bitcoin is beginning to attract financial advisors for two big reasons.

“The upside potential remains very very big for Bitcoin and it is the outsized potential of returns. The stock market makes 10% in a year. Bitcoin routinely moves up or down 10% in a day. And so it is the potential for outsized returns.

It is the number one performing asset class of the last one, three, five, and ten-year periods since inception and many people believe it’s still in its infancy. So there’s a tremendous opportunity for that…

The number one reason that advisors say they are interested in this is the fact that Bitcoin is uncorrelated. Its price movements have nothing to do with anything else, not with the stock market the bond market, interest rates, inflation rates, economic policy, Fed action, nothing. And if you truly believe in diversification, you want uncorrelated and even better non-correlated assets in your portfolio.”

The prominent investor says that as big institutions pile into Bitcoin, a massive legitimization of the leading cryptocurrency will take place.

“The conversation is shifting from ‘You’re conspicuous if you own it,’ to ‘You’re conspicuous if you don’t’ and I think that trend is going to continue even further.

Now that you can buy Bitcoin at PayPal and you have MicroStrategy for example investing over half a billion… We are clearly in an environment where Bitcoin is now mainstream, and this legitimizes the asset, and there’s going to be a continued snowball effect of this where people will begin to realize it’s routine, just as the gold ETF made gold a routine asset for portfolio diversification.

The first two weeks that ETF raised a billion dollars. So yes, I do believe we will continue to see broad diversification and greater mainstreaming by institutions, endowments, pension funds insurance companies and so on.”

Edelman isn’t looking through rose-colored glasses though. He still believes Bitcoin comes with significant risks, which is why he has limited his exposure to it.

“There still remain massive risks: technological risks, regulatory risks. Governments could get very upset with all of this. We don’t know where it’s going to go, so we want to keep our heads about us, not over invest, and not subject ourselves to portfolio risks that would harm our personal finances.”


Updated: 3-19-2021

Don’t Count On Bitcoin To Be A Sure-Thing Inflation Hedge

Cryptocurrency’s history is too short to judge whether it can provide protection against rising prices.

Hardcore Bitcoin enthusiasts say the digital coin is the world’s best hedge against rising consumer prices. The logic: Unlike U.S. dollars or any other normal currency, it’s designed to have a limited supply, so it can’t be devalued by a government or a central bank distributing too much of it.

Almost every bull case on Bitcoin has looked prescient lately—the cryptocurrency is trading at around $57,000 a coin, up from about $5,000 a year ago—so that’s added some buzz to this inflation story.

With the economic outlook perking up, Covid-19 cases falling, and greater amounts of fiscal stimulus on the horizon, investors in all kinds of assets seem to expect a bit of a rise in prices. But that’s coming from a very modest base. Over the past year, the inflation rate in the U.S. has been 1.7%.

And then there’s the question of whether the digital asset would really act as an effective hedge. It doesn’t have a long enough history to establish that, says Cam Harvey, senior adviser to Research Affiliates and a professor of finance at Duke University.

Theoretically, if investors come to regard it as similar to gold, Bitcoin might hold its value over a very long term—as in a century or more, Harvey says. In their research on gold, he and his colleagues have found that it has held its value well for millenniums.

But they also found that it’s prone to manias and crashes over shorter periods. (Gold, notably, is down 9% this year despite all the inflation talk.)

Bitcoin too has swung wildly in its short life, for reasons barely connected to anyone’s view on inflation. “What’s going to happen to Bitcoin? It’s really unclear,” Harvey says. “The price is not just driven by the money-supply rule, it’s driven by other speculative forces. That’s why it’s multiple times more volatile than the stock market.”

It’s conceivable that a bout of inflation could have the opposite of the expected effect on Bitcoin. If inflation induced a recession, for example, investors might respond by stepping away from riskier assets such as cryptocurrencies.

In recent weeks, when investors concerned about inflation pushed the 10-year Treasury yield from 1.34% to as high as 1.62%, Bitcoin suffered its worst drop in months.

Crypto proponents argue that Bitcoin traders long ago anticipated bond yields would rise—and a subsequent spike in yields did roughly track with a bump in crypto. Still, Bitcoin’s recent moves bear at least a passing resemblance to more straightforward speculative trades.

Bitcoin has received a stamp of approval from more than a handful of notable Wall Streeters, including veteran hedge fund manager Paul Tudor Jones, who say they like it as a store of wealth.

“That is certainly an element that has driven investment by institutions, particularly in the wake of the ways in which policymakers have worked to jump-start the economy” after the Covid slowdown, says Michael Sonnenshein, chief executive officer at Grayscale Investments, which runs a fund that holds Bitcoin. “Certainly we have no shortage of global macro investors for whom adding Bitcoin has acted for them as a hedge for inflation.”

Bitcoin’s strongest advocates see its rising price as an early-warning sign that the traditional financial system is vulnerable, and argue that the cryptocurrency could rise further as investors look for a haven.

Such arguments hinge on the idea that inflation won’t just edge up with a growing economy, but could explode as a result of so-called money printing.

The Federal Reserve doesn’t change the money supply by literally printing bills. However, a measure of the amount of money in the financial system known as M2 has increased, thanks in part to accommodative policy.

Fed Chairman Jerome Powell said in recent congressional testimony that the growth of the money supply no longer has important implications for the economic outlook. “We’ve had big growth of monetary aggregates at various times without inflation,” he said. “So it’s something we have to unlearn.”

Jim Paulsen, chief investment strategist at the Leuthold Group, agrees. While there may be more money, its velocity—or the frequency with which money changes hands—has dropped off. That’s a crucial factor because it shows money is being saved rather than spent, which keeps price pressures muted.

But even if velocity turns higher, offsetting disinflationary forces could still come into play, including an aging population and digital technology’s propensity to push prices down. “Inflation is turning up a little bit, but I don’t think that means that crypto is going to go nuts,” Paulsen says.

Bitcoin is unlike most other inflation hedges. Its value is based entirely on other people’s willingness to hold it: The digital token isn’t tied to any other asset, such as oil or real estate or earnings from a business, that might naturally rise in value along with consumer prices.

It’s possible that inflation could go up and it’s possible that Bitcoin could too, but the two aren’t necessarily linked. One of Bitcoin’s best-known bulls, Ark Investment Management founder Cathie Wood, said in a recent webinar that she’s as concerned about the forces of deflation—or falling prices—as she is with inflation.

“The kindling wood for inflation exists,” says Marc Chandler, chief market strategist at Bannockburn Global Forex. “One has to make a judgment about whether there’s sufficient spark.” Instead of looking at Bitcoin prices as a weather vane of inflation, he prefers to look at signals such as oil prices, shipping costs, or the price of semiconductors.

They’re all rising as the economy gains steam, but that doesn’t mean the dollar’s being undercut by a flood of printed money. “The high priests of the cryptocurrency space look for any reason to help their case,” he says. “I’m still hesitant to think that Bitcoin tells us anything about high-frequency economic variables.” —With Katie Greifeld


Updated: 4-21-2021

The ‘Marriage or Mortgage’ Trap

In a new Netflix show, couples decide whether to spend their savings on a wedding or a home. We asked personal finance experts how much reality TV reflects actual reality.

In each episode of Netflix’s “Marriage or Mortgage,” a different couple from Nashville meets with a real estate agent, Nichole Holmes, and a wedding planner, Sarah Miller, who convince them to blow their nest egg on one of the show’s eponymous options. The show is in turn mind-numbing, heart-wrenching, and infuriating. (Also addictive.)

Filmed before the pandemic, the couples on the show are operating in a lukewarm housing market, and without the hindsight that would tell them not to risk it all on a big spring 2020 wedding.

Their dilemmas are complex nonetheless: A couple is still living in the house one of the women once shared with her ex; another pair is abstaining from sex until marriage, but they’re also over living with roommates.

Lost fathers, fertility challenges, heirloom-destroying fires — whatever the trauma, there is only one way to move forward. But which is it? A marriage or a mortgage?!

One common reaction to the series has been increasingly loud shouts of “NOOO!” as people choose marriage only to postpone or downsize. (Or gleefully roll out a ranch dressing fountain at their pared-down wedding, Covid be damned.) It also reveals how (or how not to) think about the costs involved with two persistent tropes of American adulthood.

But how close is this to real life? We asked personal finance advisers to weigh in, and what advice they had for those lucky enough to be stuck in a similar stalemate.

“The concept’s a little interesting,” Justin Green says diplomatically. He’s a financial planner and the founder of Assist FP who watched a couple of episodes with his soon-to-be mother-in-law while deep in the throes of planning for his own forthcoming wedding. “The one part they nailed is that young couples kind of do have to focus on one or the other first.”

The typical pair on the show has a budget between $25,000 and $30,000; they’re planning to put all of it toward the wedding or a down payment on a home that generally costs between $300,000 and $400,000.

The current home value for a house in Nashville, according to Zillow, is $323,075, up from just under $300,000 in January 2020 and $280,000 in January 2019.

As housing prices in mid-size cities like Nashville rise, the stakes of choosing a wedding first are getting higher, said Shaun Melby, the Nashville-based founder of Melby Wealth Management.

If they’re looking at a $300,000 home that’s going to cost $380,000 in a couple of years, “that $30,000 wedding may have actually cost them $80,000,” he said.

“Not only that, they will now need to come up with even more of a down payment than before just to afford the same homes they were looking at and they’ll pay a bigger mortgage payment.”

Only Human

While it’s obvious that the more practical move would be to buy a wealth-building home instead of throwing a party, the sensible choice doesn’t always make for great TV — or even real life. Over the course of 10 episodes, four couples chose house, and six chose wedding.

“A financial plan can easily show that $25k-$30k spent on a memory instead of investing, whether through a home down payment or in the stock market, is not a good idea,” added Eric Powell, the founder of the virtual financial firm The Future Mill. But “the reality is humans, not just Millennials, want to have great memories.”

Powell himself is a human Millennial who chose to compromise: He and his wife decided on a destination wedding that cost them $5,000. They saved the rest and eventually put it toward a house.

“They make it seem like the only way to be happy is with the perfect home or the perfect wedding.”

Still, that’s not a calculation most younger Americans can afford to make, according to Census Bureau data and research. In 2018, 9% of young adults between 18 and 25, and 15% of young adults ages 25-34, lived with a partner they weren’t married to, a cohabitation trend that coalesces with lower marriage rates.

Since the ‘60s, the proportion of married young people has flipped: In 1968, around 60% of 18-34 year olds were married. By 2020, according to Census figures, 69% of 18-34 year olds had never been married. But that’s not to say they’re forgoing marriage to live together in homes they own.

“If economic resources appear to be important for entry into marriage, then it is understandable why many young adults today choose not to marry; they are facing unprecedented economic burdens despite being on average more educated than previous generations,” wrote Benjamin Gurrentz, then a survey statistician in the Census Bureau’s Fertility and Family Branch, in a 2018 working paper.

It’s not shocking that crippling student loan debt and recession-sunk job markets lay a less stable foundation upon which to hold barnyard nuptials and/or afford a garage with 10 foot ceilings.

Hidden Costs

For Green, the financial adviser at Assist FP, the “emotional power” of a wedding won out over buying a house. (He lives in a rental apartment in Boston with his fiancée.)

But he advises keeping something in the bank for unexpected emergencies, or practical matters like buying a bed. It’s unclear if the couples in “Marriage or Mortgage” are blowing their entire savings or leaving some cushion leftover.

“You really want to make sure you don’t sacrifice your emergency fund,” says Green.

Though spending on a house has been framed as a sounder investment, it’s also a longer-term financial commitment. Closing costs alone can add thousands to the bill, along with furniture and maintenance and property taxes.

Based on the cost of the home, most couples on the show have budgeted to pay around 6% to 10% for their down payment, an amount that reflects what the average American pays, too.

While the median percentage has risen since the financial crisis, it has never reached even 10%, based on an analysis of 20 years of down payments by ATTOM Data Solutions, a real estate and property data company. In the fourth quarter of 2020, the median down payment was 7.7% of the median sales price.

Colin Moynahan, a financial adviser for Twenty Fifty Capital in Charleston, South Carolina, says it’s better to put down a bigger down payment if possible.

A good rule of thumb is looking at how long you’re going to stay in the property, Moynahan says: If the buyers anticipate living there for 15 to 20 years, “where they have time to ride out the ups and downs of the real estate market, that’s where they can get away with putting down 10%,” he said. “Anything less than 10% is foolish. It’s going to cost you at least 5% to sell the property.”

“For the down payment, they really, really want to be as close to the 20% mark as possible,” Moynahan says. Especially, in a housing market where almost half of U.S. homes are selling within a week of listing, larger cash offers are winning out.

Netflix vs. Real Life

Logan Murray, a financial planner and tax preparer for Pocket Project, says he fears that “Marriage or Mortgage” could be harmful to viewers. “The famous quote ‘comparison is the thief of joy’ is relevant with this show,” he says.

“They make it seem like the only way to be happy is with the perfect home or the perfect wedding. But with anything, there should be compromise: why can’t there be both?”

Because Holmes or Miller have to win, that’s why. The show is as much a competition between the two of them as it is about the couple’s dreams and priorities.

And they pull out all the stops to stir the pot and get the sale, with huge discounts on vendors and custom candy competing with new home appliances and comped closing costs.

“It’s shows like these that leave couples with unrealistic expectations about what weddings actually cost,” said Kaleigh Northrup, a wedding planner at Kay Northrup Events. “Don’t get me wrong, you can have a wedding for $25,000 to $30,000 … but they won’t look like the weddings that are being portrayed. In reality, these weddings are costing way over $30,000.”

Northrup’s husband Jake is a financial planner for Experience Your Wealth. To afford their 2019 destination wedding in Santorini, their parents helped out, but they still put down $20,000 of their own money.

“Could we have a higher net worth right now if we paid for a home instead of the wedding? Sure, a home builds equity, whereas a wedding doesn’t,” said Jake Northrup. (They still haven’t taken the plunge on a mortgage.) “But our goal isn’t necessarily to maximize our net worth, our goal is to maximize our life and our experiences together.”


Updated: 5-3-2021

Financial Advisers Lead The Institutional Push Toward Crypto Adoption

Grayscale’s Michael Sonnenshein, Amber Group’s Jeffrey Wang and Edouard Hindi of Tyr Capital believe financial advisers could be ushering in a new era of crypto adoption.

In the past, there were plenty of reasons for financial advisers to dismiss Bitcoin (BTC) and other cryptocurrencies as a worthy investment, but all of that is starting to change as more institutions become attuned to the digital asset class.

A face-melting rally for Bitcoin between September 2020 and April 2021 amplified the need to push beyond the narrative that digital assets are simply too volatile to include in client portfolios.

In a keynote address at the 2021 virtual CFC St. Moritz Conference in January, Grayscale CEO Michael Sonnenshein outlined six major themes that could shape the cryptocurrency market in the near future. One of those themes was the potential for greater adoption among financial advisers.

‘Curiosity And Demand’

In a follow-up interview with Cointelegraph, Sonnenshein explained that “curiosity and demand from clients are driving financial adviser interest in crypto.” His conclusion stems from a preliminary survey commissioned by Grayscale showing that “more than half of advisers are receiving questions from their clients about cryptocurrencies.”

While this may not drive immediate action, cryptocurrencies have certainly become a consideration for advisers, he explained. “Ultimately, financial advisers are responding to client demand,” he said, adding:

“Crypto generally and Bitcoin specifically has been well covered in the press, with major corporations and financial institutions making Bitcoin part of their balance sheets, and notable entrepreneurs and investors voicing their investments in Bitcoin. If you’re a knowledgeable investor, you’re going to want to know more about this asset class, and if you have a financial adviser, you’re going to ask them about it.”

Sonnenshein also noted that financial advisers are among the investors who invest in Grayscale’s family of funds, whose combined assets now exceed $46 billion.

“Bitcoin remains the most popular digital currency, though we also see growing interest in Ethereum and other digital assets as well,” he said.

Edouard Hindi, co-founder and chief investment officer of Tyr Capital, a United Kingdom-based cryptocurrency hedge fund manager, said financial advisers have increased their allocation of digital assets, especially Bitcoin, over the last six months.

The shift has also been observed at private banks, which have gone from seeking education on cryptocurrency to investing directly with Tyr Capital Arbitrage.

He explained that “the bulk of the interest we are seeing remains concentrated on the directionless high risk/reward attributes of funds like Tyr Capital Arbitrage and directional exposure to Bitcoin.”

Crypto Exposure No Longer ‘Career-Ending’

Bitcoin’s newfound legitimacy within the institutional ranks has eliminated much of the so-called “career risk” involved with investing in the digital asset market. As Hindi noted, one year ago finance professionals were thought to be taking a “career-ending risk” for investing in crypto.

Now, it’s considered career-ending not to have any exposure to digital assets. The final domino to fall, Hindi believes, could be fiduciary standards:

“Now that custody and regulatory barriers are slowly dropping, what could still be hindering a broader adoption of crypto by financial advisors is the perception that ‘fiduciary standards’ remain a challenge in openly advocating for the asset class to be included in customers’ portfolios.”

Jeffrey Wang, head of Americas for Amber Group, a crypto-finance startup founded by former Morgan Stanley, Goldman Sachs and Bloomberg professionals, believes independent advisers have a lot more freedom to diversify into crypto than the major banks.

“I think there will be a large bottleneck for the advisers who work at the firms owned by big banks to offer crypto that isn’t in the form of a listed ETF [or] security,” Wang said. “These banks aren’t nimble enough to expand their wealth management offerings, especially for non-listed crypto assets.”

“It is a huge undertaking for these firms/banks to be able to add offerings in crypto in terms of adopting their existing risk management systems, infrastructure, compliance, legal, front office trading systems so the decision won’t come without a lot of work and due diligence.”

A Changing Landscape

While institutional adoption of digital assets remains nascent, several major investors and corporations have made a big splash by acquiring Bitcoin. Legendary investors Paul Tudor Jones and Stanley Druckenmiller own BTC.

On the corporate side, MicroStrategy and Tesla have acquired billions of dollars’ worth of Bitcoin to hedge against currency debasement. MassMutual, a Massachusetts-based insurance firm, purchased $100 million worth of BTC in December 2020. It’s estimated that businesses currently hold nearly 6.8% of the circulating Bitcoin supply.

Meanwhile, major institutions including BlackRock, Morgan Stanley, Goldman Sachs, Citibank and JPMorgan Chase have adopted a more positive outlook on cryptocurrencies.

BlackRock’s leadership has gone as far as comparing Bitcoin to gold, with CIO Rick Rieder claiming that BTC will eat away at the precious metal’s market cap in the long run.

Jeffrey Wang believes institutional adoption will be “very prevalent” in the next 12 to 18 months, going as far as saying that “the majority of firms will embrace blockchain in some way.”

So far, the latest corporate earnings season on Wall Street hasn’t revealed any new crypto investors, but that could soon change as the bull market continues to grow.

Tesla, meanwhile, announced that it sold a portion of its Bitcoin for a significant profit, a move that CEO Elon Musk said demonstrates the asset’s liquidity. Musk later confirmed that he has not sold any of his Bitcoin.

There’s also strong evidence that the venture capital world is backing cryptocurrency projects with ever-growing conviction. In addition to the dozens of VC-led investment rounds covered by Cointelegraph in recent months, Andreessen Horowitz is reportedly eyeing a new crypto-focused investment fund worth up to $1 billion.

That would align with the venture capital firm’s recent crypto-focused investments into Aleo and OpenSea, among others.


Updated: 6-3-2021

Big Rise In Financial Advisers Adding Crypto Assets To Client Portfolios

More than a quarter of financial advisers intend to recommend crypto investments over the next year.

According to a survey, financial advisers are recommending investments in Bitcoin (BTC) and crypto assets to their clients more than ever before.

A report by the Financial Planning Association released on Tuesday has taken a look at the changing attitudes toward crypto assets. The “2021 Trends in Investing Survey” revealed that more financial advisers than ever are recommending their clients have some crypto in their portfolios.

The survey was conducted in March and received 529 online responses from professional financial advisers who offer clients investment advice and recommendations.

It stated that 14% of financial advisers have already added crypto assets to their clients’ portfolios or are recommending it to them. Even more are planning to do so over the next year.

“More than a quarter (26 percent) of advisors indicated in the 2021 survey plan to increase their use/recommendation of cryptocurrencies over the next 12 months.”

The survey revealed that the figure is up significantly from the previous year, when less than 1% of advisers were recommending exposure to cryptocurrencies.

Furthermore, 49% of finance professionals indicated that, in the last six months, clients have asked them about investing in cryptocurrencies, a figure that has almost trebled from just 17% in 2020.

Just below half — 48% of financial advisers — claimed to occasionally read news stories on cryptocurrencies and are somewhat comfortable conversing about them, with one-third of advisrs actively educating themselves on digital assets.

Clients appear to be less concerned with market volatility this year compared to last, the survey found. More than half — 52% — of financial advisers stated that their clients inquired about market volatility over the past six months, compared to 76% for the previous year.

Investors may be drawn to crypto assets as a hedge against inflation, which has been exacerbated during the pandemic and ongoing fiscal stimulus packages. Inflation in the United States is hovering around a 13-year high.

In early May, Cointelegraph reported that financial advisers have been leading an institutional push toward crypto-asset adoption.

Grayscale CEO Michael Sonnenshein told Cointelegraph that “curiosity and demand from clients are driving financial adviser interest in crypto.” His observations were derived from a survey commissioned by the investment firm showing that more than half of the surveyed advisers are receiving questions from their clients about cryptocurrencies.


Updated: 6-17-2021

Bitcoin First ‘Genuinely New Asset Class’ In 150 Years, Says Ric Edelman

Financial adviser, Ric Edelman says his colleagues need to get rid of their bias and examine Bitcoin and crypto assets with “open eyes” and “genuine curiosity.”

Ric Edelman, founder of financial advisory outfit Edelman Financial Engines, described Bitcoin (BTC) and crypto assets as a “completely new and different asset class” that has nothing in common with mainstream staples like stocks, bonds, real estate, oil, or commodities, to mention a few.

Speaking to Yahoo Finance on Wednesday, the financial adviser called Bitcoin and crypto “the first genuinely new asset class in about 150 years.” According to Edelman, not since the gold market has there been an innovative asset class like cryptocurrencies.

As part of the discussion, Edelman revealed that he was helping educate financial advisers about the need to be more open-minded about crypto as a viable portfolio diversifier.

Indeed, as previously reported by Cointelegraph, a recent survey by corporate research outfit Opinium showed that over 90% of 200 polled independent financial advisers in the United Kingdom were against crypto investments for their clients.

While not specifically reacting to the Opinium poll, Edelman characterized the reticence among independent financial advisers (IFAs) as being due to bias, stating:

“Most financial professionals have been in business a long time […] But the more experience, the more talent you have, the more difficult it is to get your head around Bitcoin.”

According to Edelman, given that portfolio diversification and rebalancing are popular strategies of IFAs, then BTC should be an obvious choice.

Edelman further argued that financial advisers need only look to the technological underpinnings of cryptocurrencies to see that cryptos are not in the same cadre as tulips or beanie babies.

For Edelman, crypto and blockchain technology, in general, is the “most impactful commercial innovation since the development of the internet itself.”

Back in 2019, the financial adviser remarked that a Bitcoin exchange-traded fund in the United States was an inevitability.


Updated: 8-24-2021

Introducing Crypto For Advisors, A Newsletter For Financial Planners

A new CoinDesk newsletter defining crypto, digital assets and the future of finance.

CoinDesk is launching a new newsletter – one that’s different from our existing titles in an important way. It’s called Crypto for Advisors, and we’re building it specifically for financial advisors (FAs) and registered investment advisors (RIAs). The newsletter will do what CoinDesk is best at – informing and educating a highly engaged audience – only this time the audience is financial professionals who are new to crypto, curious about it and looking for ways to incorporate it into their work.

Why a newsletter for this audience, and why now? Read on.

Financial security is inherently a long game. We all want it, but few of us are sophisticated enough about markets and assets to take that security into our own hands. That’s why the financial advisor industry exists.

Similarly, the world of crypto is a mystery to many. That’s not surprising: The intricacies of cryptocurrencies and the markets built around them can be profoundly different from traditional assets. That learning curve keeps many people out of the market.

Still, the rapid expansion of crypto as an asset class has fueled a lot of curiosity. A recent survey by Gemini revealed 63% of U.S. adults consider themselves “crypto curious,” meaning they want to learn more or are planning to buy crypto soon.

In a normal world, those people would turn to financial advisors to help them navigate the subject. But while some FAs and RIAs have stepped up and studied crypto markets to figure out their place in the portfolios of people looking for long-term success, many others have taken a more absolute approach to the crypto industry and avoid it altogether.

While that’s certainly the safest approach, it also cuts them – and their clients – out of this interesting and growing asset class.

Such a conservative approach is often the result of a lack of knowledge and resources – and that’s where our new newsletter comes in.

Every week, Crypto for Advisors will speak directly to the FA community, informing and educating FAs about how crypto can fit into their lives as well as unpacking the most recent developments in crypto and finance for investors curious about this asset class.

Why us? For starters, CoinDesk is home to the best reporting about crypto and crypto markets on the planet, and has been for the better part of a decade. From that foundation, we’ve tapped into our community, in particular the people who helped us create Bitcoin for Advisors to help create this newsletter.

You’ll see authors from the advisor world, journalists who cover the industry and writers who specialize in explaining the complex landscape of crypto to financially sophisticated audiences.

The rapidly expanding crypto market is attracting the attention of the world, and many investors are anxious to turn their curiosity into action. To help them find their way in this new – and volatile – territory, they need financial advisors who can continually build their understanding of digital assets. And Crypto for Advisors is designed to do just that.


Updated: 9-9-2021

Crypto For Advisors: 5 Ways Bitcoin Can Play A Role In A Portfolio

Bitcoin isn’t going anywhere. So how can it fit into the portfolios of the future?

Recently, a well-known bitcoin writer tweeted, “If your financial advisor hasn’t recommended bitcoin yet, fire them.” A tweet like this gets polarizing quickly. Right or wrong, there is greater nuance to the role of bitcoin in portfolios.

As a fiduciary, you cannot disregard an asset that is the best-performing asset of the 21st century. Whether that sits well with you or not, bitcoin is not going anywhere. So what are some of the ways bitcoin can fit into the portfolios of the future? Below, I’ll guide you through some of the main narratives for incorporating bitcoin into a portfolio.

Digital Gold

I have used the “digital gold” narrative early in my bitcoin journey, but cryptocurrency is far more than a gold replacement. The role that gold has historically played is protecting wealth: An ounce of gold in Roman times bought you a nice tunic, and an ounce of gold today buys you a nice suit. The idea of maintaining your purchasing power has been gold’s appeal.

The inflation rate of gold is below 2%, so you can store wealth over generations as its devaluation happens slowly versus a purely fiat-backed currency. So if you only see bitcoin as a commodity holding to replace gold, then a weighting like Ray Dalio’s risk-parity recommendation to allocate to gold would make sense. A 7.5% weight for bitcoin then would be the recommendation under this type of approach.

Growth Sleeve

If you like the idea of a core and satellite approach, you may want to allocate to thematic growth themes. The concept of core and satellite is to own the broad market, but to complement that with a 10%-20% allocation in opportunities you view as being able to outperform. Bitcoin is the fastest-growing asset of the past decade, so it fits into that narrative.

You can also look at the network effects of big tech, such as Google, Apple, Amazon and Facebook – once a dominant digital network surpasses $100 billion market cap, it’s here to stay. Bitcoin today has crept right back under the $1 trillion market cap.

Venture capital has historically looked at where the demand curve is today versus where opportunity via adoption cycles is going, and network effects are powerful. People usually learn and share a tool or technology and then need to see a massive 10x or greater improvement to then move and “upgrade” to what’s better. A maximum of 10% weight would be the recommendation under this approach.

Credit Insurance (Bonds)

Greg Foss, a veteran trader with more than 30 years of experience in high-yield credit markets, is whom I credit with the idea of bitcoin being default insurance for fixed-income investors. In a recent piece, Foss articulated the contagion and cascading risk in the credit markets for bond investors, claiming that today the biggest risks are in credit markets, where risks can get hidden from the average investor.

Think of collateralized debt obligations in 2008 – the lessons from that period were not learned and are being repeated via looser and looser credit ratings on bond holdings as everyone is chasing yield in a world of low rates. The counterparty risk is usually unknown until it is too late – but bitcoin, when self-custodied, has no counterparty risk. This peace of mind and security is undervalued in today’s market.

Foss doesn’t claim that bitcoin’s price wouldn’t be affected in a credit meltdown, but that event would be a buying opportunity as more and more investors learn the merits of counterparty risk. The recommendation here for the client with a 60/40 portfolio, which has 60% in equities and 40% in bonds, is a 5% weight from their bond exposure.

Dragon Portfolio

Chris Cole of Artemis Capital Management wrote a research paper titled Rise of the Dragon: From Deflation to Reflation. He advocates that everyone construct a portfolio that can last 100 years regardless of what the markets do over any given cycle. The Dragon Portfolio is constructed to be resilient and offer actual diversification; the allocation includes equities, bonds, commodity trend, gold and long volatility.

Each is between an 18% and 24% weight, so it’s almost an equal-weight approach. All of these holdings counterbalance each other to allow for a unique, independent return generator.

By avoiding large corrections, the compounding over years leads to a better 100-year portfolio that Cole argues cannot be beat. If you believe in his detailed research, it makes sense that bitcoin will replace gold given that we are moving from an analog age to a digital one.

Gold has passed the baton to bitcoin, and it slides into that allocation for this portfolio style. It does not correlate with any other of the allocation weights and provides an independent return stream. A 19% weight would be the recommendation in this approach.

Equity Exposed Companies

I can hear you now: What if your client won’t own bitcoin directly, and you don’t like the idea of paying 2% for Grayscale Bitcoin Trust (GBTC), the main way investors have sought exposure to bitcoin without their own wallets? (Disclosure: Grayscale is owned by Digital Currency Group, the parent company of CoinDesk.) I’d suggest adding the stocks of bitcoin miners and others that hold bitcoin on their balance sheet.

The most well-known company with a bitcoin balance sheet is MicroStrategy, led by Michael Saylor. An allocation to an index-style approach here provides exposure, allowing an equity weighting versus owning bitcoin directly. I would not say this is a 1:1 replacement, but it could be a solution for you today. This then allows you to get up to speed on the proper way to help clients own the asset directly. The recommendation here is of no more than a 5% weight for one company, and a basket approach is best.

Moving Forward: Bitcoin As A Problem Solver

All of the above narratives give you various rationales and different conclusions on the appropriate weight to hold in bitcoin for clients.

When looking at the risk of owning bitcoin, even a “Mark Yusko position” of getting off zero and holding 1% is far less risky in the long run than owning 0%. Yusko is the founder, CEO and chief investment officer of Morgan Creek Capital Management and the managing partner of Morgan Creek Digital. He has worked in the endowment space for years and worked with some of the largest allocators in the U.S.

When you run a financial plan for clients, for instance, how often do you run a scenario of the U.S. dollar losing its reserve status? When do you run the consistent and accelerating devaluation of the U.S. dollar in a plan? Never?

The facts are that bitcoin, even in a small amount, allows you to solve this what-if for clients. You can run a scenario of a small allocation of bitcoin going to $0 and the client still having a successful outcome.

The role of a financial plan should be to provide peace of mind and certainty. We’ve all seen clients become too conservative too early and jeopardize their future success – the same can be said for advisors who refuse to review the merits of bitcoin in a financial plan.

Bitcoin helps solve a real issue for clients trying not to outlive their money. Only you, as the partner to your clients, can know what the right fit is for bitcoin, but the evidence is clear that it does belong in everyone’s portfolio.

Crypto For Advisors: How Do You Value Digital Assets?

Traditional models don’t fit for valuing digital assets.

When I was first asked to write this column for CoinDesk, I called an old acquaintance, financial advisor and OnRamp Investing CEO Tyrone Ross, who has channeled his exuberance into proselytizing and teaching the benefits of cryptocurrency investing to financial advisors.

I wanted to pick Ross’ brain on what he thought our industry most needed to know about digital assets – and one of the first things out of his mouth was valuation.

“As far as literacy is concerned, the biggest trip-up for advisors is still the valuation methodology for crypto assets,” Ross said. “There is no way to discount cash flows for crypto assets. You need to embrace new valuation methodologies like daily active users or network access. If you’re still talking about price-to-earnings ratios, discounted cash flows or the capital asset pricing model, you need to realize that those terms do not apply here. The old models don’t fit.”

Most advisors are well versed on valuation methodology for traditional assets like stocks, bonds and real estate, though these asset classes have their own unique characteristics and there are ongoing debates about the best way to value them and how to use that information.

For example, many professionals have abandoned the once widely practiced method of using a ratio of a stock’s current price to the book value of its business as a measure of whether it is expensive or not. Still others contend that in a world full of intellectual and virtual property, the discounted cash-flow methodologies of venerated investors like Benjamin Graham and Warren Buffett are no longer as relevant to a company’s value as they once were.

If we can understand how technology and digital breadth can make a company worth more than its tangible parts, maybe we can understand how an entirely digital asset could retain value without any of those tangible parts.

What Are Digital Assets Worth?

The fundamentals of fiat currencies are founded upon their utility as stores of value, units of measurement and mediums of exchange.

Most cryptocurrencies have similar characteristics, but because much of the trading thus far has been speculative, they’re an asset class where technical analysis reigns supreme. The actual fundamentals of cryptocurrencies are still being explored by technologists and academics alike.

“In many cases, it’s the hands-on users who know more about what is going on with the technology and understand these business models and the ‘tokenomics’ of their projects more than any advisor would,” said Matthew Sigel, head of digital assets research for VanEck, a traditional asset manager that was an early entrant into the digital assets space.

“That’s why I look at Reddit and see who is trading code on GitHub. These are open-source technologies, for the most part; no company is building them, so you can go read what developers are building and what participants expect as far as the economics around a token and its features.”

In my previous column, Sarson Funds Chief Marketing Officer Jahon Jamali told us that most cryptocurrencies can be valued based on the size of the network participating in their underlying blockchain.

That sounds great, but what does it mean, exactly? Goldman Sachs published a note in July confirming that the free-float market capitalization of major cryptocurrencies, including bitcoin, ethereum, bitcoin cash, litecoin and XRP, actually does correlate to the network size. We can use network size and Metcalfe’s law, a mathematical principle that the value of any network is the square of its number of participants, to figure out what these tokens are worth.

Of course, that means we have to find true and relevant methods of measuring the size of a network. Just as price-to-book and price-to-earnings ratios may not tell the whole story about the values of today’s stock market leaders, we need to find the right metrics to uncover the size of a cryptocurrency’s underlying network.

Key Metrics

On-chain metrics give us information about the activity across a blockchain, including transaction count over a set period, or the total value of transactions over that period, active addresses, hashrates and fees paid.

Project metrics tell us the thinking behind a cryptocurrency, the technology it uses, its use cases and the supply and distribution plan for tokens. Finally, financial metrics tell us the market capitalization of the asset, its liquidity and its volume.

With some metrics in hand, it’s up to us to use them in meaningful ways to describe the value of a digital asset. One proposed method is the network value-to-transaction ratio, or NVT ratio, calculated by dividing the market-capitalization of a digital asset by the transaction value over a set period.

Another method, market-value-to-real-value ratio, or MVRV, is the ratio between the market capitalization of a cryptocurrency to the value of tokens stuck or abandoned in inactive wallets. MVRV is an expression of relative value that may indicate whether a token is overvalued or undervalued.

Why It Matters

“Trust officers and estate attorneys need to make decisions on digital assets, but there’s no industry standard yet,” said Whitney Solcher, chief investment officer of Ulrich Investment Consultants, a registered investment advisor (RIA) with $2 billion in assets under management. “How do you value them? How will they be taxed? How do you transfer them on to the next generations?”

There are some advisors who understand full well some of the valuation techniques behind digital assets, but are still hesitant to embrace them. Ulrich, for example, runs most of its investments in-house and follows the cryptocurrency space closely, but has decided to hold off on investing in digital assets.

“Broadly, as financial advisors, we have a hard time assessing actual cryptocurrencies as true money, and we don’t feel they are really a store of value now given their volatility,” said Solcher. “We do, however, believe in the technology, and that’s the place we’re more comfortable putting our investment dollars.”

Solcher said that Ulrich accesses the blockchain technology world through investments in companies such as PayPal, Amazon and JPMorgan Chase.

But the prevailing trend is that fewer advisors today spend their time valuing their clients’ stocks and bonds than in the past, investment management is more often than not outsourced, and thus, it’s less important that advisors know the intricacies of cryptocurrency valuation.

Instead, they should be able to translate these fundamentals to their clients in a digestible way while being able to access digital assets through a variety of products and strategies.

So yes, moving forward we will need to know why a digital asset like bitcoin or ethereum has intrinsic value, but we probably won’t be called to calculate that value in real time.


Updated: 9-30-2021

Why Bitcoin Has Value And Should Be Part Of Your Client’s Portfolio

Bitcoin is a technology that’s also money and that can be used for savings. It’s important for advisors to understand the value behind it to determine how it can fit in a client’s asset allocation.

Personal prosperity is the core of financial planning and why we work with our clients. Our goal as an advisor encapsulates helping clients achieve sustainable income through job satisfaction or entrepreneurship, increasing savings to support financial goals and investing according to a client’s objectives and tolerance for risk.

In today’s world, the line between saving and investing has become increasingly blurred. Our job as the advisor is to encourage our clients to invest their money in stocks, bonds or real estate beyond a simple savings account. If our clients hold only inflationary currency, it will be impossible for them to reach the financial freedom they desire.

Accordingly, it’s important for us as advisors to consider how clients should save and invest. Risk-adjusted returns, while not perfect, provide advisors with insights about asset classes, as well as their suitability for portfolios. We look at the Sharpe ratio and other risk-adjusted metrics to determine where an asset fits in a client’s allocation and how it can help them achieve their financial goals.

One asset to look at more closely, in my view, is bitcoin. While bitcoin has been incredibly volatile over the past decade, it is undeniable that it has the highest risk-adjusted returns.

Bitcoin, however, has no cash flow. Bitcoin has no underlying asset backing it, and it is not backed by any government. From an outsider or critic’s perspective, bitcoin was created out of thin air and therefore should have no value and not be considered for any client portfolio. Yet the market cap of bitcoin is over $800 billion and was over $1 trillion very recently. If bitcoin truly has no value, how can the market value it so substantially?

Let’s discover why bitcoin in particular has value, and subsequently why it should be included in your clients’ asset allocations.

First, bitcoin is money. As individuals, we value the ability and freedom to receive, hold and send money. There are characteristics of money that make sending, receiving and holding money possible, exceptional or cumbersome.

No form of money is going to score highly on every single characteristic. For example, while bitcoin is highly verifiable, it has a shorter history than most forms of money do.

Bitcoin’s high risk-adjusted returns over the past decade reflect its unique balance of the following characteristics:


Bitcoin can be sent anywhere in the world within minutes (or instantly on the Lightning Network). You simply copy the recipient’s address or scan a QR code into the send field of your bitcoin wallet app and money can be sent, although admittedly, there is work to be done to make sending and receiving bitcoin easier for mainstream users.


Bitcoin’s durability is encouraging. Bitcoin’s private keys are just intangible pieces of information. Therefore, they can be stored without being destroyed through wear and tear in your wallet or in a fire. Furthermore, the decentralized network that backs bitcoin has global redundancy.


Bitcoin is the most portable of all currencies. If you had access to all the bitcoin in existence, you could theoretically put it all on one hardware wallet and take it to the moon (or simply move it to a new bitcoin address).


For the most part, one bitcoin equals one bitcoin. There have been instances of addresses being blacklisted by governments due to illegal activity, but that affects only regulated exchanges, not the peer-to-peer Bitcoin network itself.


Bitcoin is the most divisible form of money. The smallest unit on the Bitcoin network itself is a satoshi, which is 100 millionth of a bitcoin. On the Lightning Network, a satoshi can be further divided by 1,000, resulting in “millisatoshis.”


Bitcoin is easily verifiable. Bitcoin’s blockchain is a distributed ledger. Anyone can run and use a full node to verify that the bitcoin received is, in fact, real bitcoin. It’s desktop software like Microsoft Office, but free and open source.


Bitcoin is designed to be permissionless at the network level. That means that no third-party meddler can get between you and your money. There are no capital controls and no gatekeepers preventing money transmission.


Bitcoin has existed for over a decade. During that time, it has increased in value as quickly as monetarily possible, with no sign of withering. The Lindy effect suggests that the longer a money or currency exists, the longer we can expect it to continue to exist.


Proponents of sound money describe bitcoin’s 21 million cap as its distinguishing feature. Because of bitcoin’s scarcity, its purchasing power is historically the most deflationary.

Holding an asset that increases in value (deflationary) is better than holding an asset that decreases in value (inflationary) over time. As advisors, we are opposed to holding copious amounts of cash in savings accounts due to inflation causing a cash drag on the overall portfolio. Bitcoin is a savings technology.

In my view, we as advisors can finally abandon the idea that long-term saving is synonymous with investment. Bitcoin allows your clients to operate under the conditions our brains find most favorable:

Make money working, spend some of that money, set aside the rest of the money under the mattress and never think about it again. Accordingly, bitcoin functions as your clients’ mattress money.


Updated: 9-30-2021

How To Find A Socially Responsible Financial Adviser

ESG investing can be confusing. It helps to have an adviser who is on the same wavelength.

It isn’t easy being an ESG investor these days. Financial products that focus on environmental, social and governance issues have multiplied, leaving many investors confused about which ones best suit their needs.

To help, some investors might be considering financial advisers who focus on ESG and are able to offer investment ideas that closely track their clients’ moral and financial goals.

For investors who want to go that route, here’s how to get started, as well as some questions to ask prospective advisers.

What Tools Can Help Me Find A Financial Adviser Who Is Focused On ESG?

There are several free, searchable online databases that list financial advisers who self-identify as having an ESG focus. Just keep in mind that being listed in a directory isn’t an endorsement of an adviser’s abilities or investment prowess. Due diligence on your part is still recommended.

  • Certified Financial Planner Board of Standards Inc.’s database lets investors filter for “socially responsible investing” to find certified planners nationwide who offer these services.
  • In the College for Financial Planning’s database, investors can search under the designation “Chartered SRI Counselor or CSRIC” for advisers.
  • Green America, a nonprofit alliance that focuses on issues including climate and clean energy, sustainable food and responsible investing, has a listing of financial-planning and investment consulting firms. Advisers listed here are certified members of Green America’s Green Business Network or are members of US SIF, a sustainable-investing trade group. According to a Green America spokesman, listed advisers self-report whether they have experience creating portfolios that are fossil-fuel free and whether they have worked with clients to pursue fossil-fuel-free investments.
  • In the US SIF’s directory of members, investors can do a basic search under the category of “financial planners, advisors, and brokers” or an advanced search to narrow the list by city, state or ZIP Code.
  • XY Planning Network, a member-based organization of fee-only advisers, has a find-an-adviser portal. Entering SRI/ESG as a keyword search will turn up a list of several dozen advisers who identify as having this specialty. To be a member of XY Planning Network, advisers must work with Gen X/Gen Y clients in some capacity, operate on a fee-only basis and be in good standing with Finra, among other criteria.

How Do I Evaluate The Adviser’s ESG Prowess?

First, see if an adviser has a disciplinary history, using Finra’s BrokerCheck, the Securities and Exchange Commission’s investment adviser public disclosure website and the CFP Board’s site. Enter the adviser’s first and last name to check for customer complaints, regulatory actions or other disciplinary measures.

After finding an adviser with a clean disciplinary history, you might ask the adviser directly about his or her experience with sustainable or impact investing and how long it has been part of their practice, says Josh Charlson, a director of manager selection for Morningstar Research Services LLC, a subsidiary of Morningstar Inc.

Ask how many clients the adviser has created ESG-focused portfolios for. “Ideally you’d be working with an adviser who has some history in this area instead of someone who just stepped into it,” Mr. Charlson says.

How Do I Assess Whether An Adviser Is Aligned With My Goals?

Start by asking the adviser for his or her approach to ESG, socially responsible and impact investing. If you are looking for a specific focus—such as environmental investing or a particular impact goal, for example—can the adviser accommodate this, or does the adviser only offer a select few investment models that aren’t readily customizable?

“If you are someone who is more focused on, say, impact investing, or you don’t want tobacco or nuclear-energy stocks, is the adviser capable of customizing the plan or the portfolio to accommodate your preferences?” Mr. Charlson says.

Or, if you’re someone interested having a more diversified portfolio centered on sustainability and impact investing, how would the adviser accomplish this?

Whether the adviser is recommending you invest in funds or individual stocks, it is also important to see how his or her investment returns compare to appropriate benchmarks.

What are some other ways to gauge an adviser’s ESG expertise?

While it’s no guarantee, financial advisers with a genuine interest and expertise in ESG and impact investing usually will highlight it on their websites and LinkedIn profiles, says Michael Young, manager of education programs at US SIF.

“If they are putting themselves out in the public sphere that they are doing this, that’s a good starting point,” he says.

Mr. Young recommends asking them about their professional networks, affiliations and designations related to sustainable investments. For example, is the adviser a member of Ceres, a nonprofit focused on sustainability, Green America or US SIF? Does the adviser speak at sustainable investing or other investor conferences about the topic?

The College for Financial Planning in 2018 began offering certification in socially responsible Investing, its SRI Counselor Designation program. It’s a relatively new designation, but Mr. Young says it can be another signal of interest in and ongoing commitment to the field.


Updated: 10-4-2021

Financial Advisers Pitch Bitcoin To Investors To Offset Portfolio Losses

New managed crypto accounts take advantage of a tax-loss harvesting loophole.

Some financial advisers have a new sales pitch for investors: You win when bitcoin goes up, and you can win when it goes down.

The wealth-management industry is starting to make the case that cryptocurrencies have a place alongside stocks and bonds in investment portfolios, even retirement accounts. A number of personal money managers are offering products that let investors buy their own stashes of bitcoin, ether and other digital currencies through their brokerage accounts.

Cryptocurrencies have surged this year, as investors, many flush with cash from government stimulus checks, have chased the potential for gains. Bitcoin breached $63,000 in the spring, a 2,000% increase since the end of December.

Big losses can follow big gains in investing, and cryptocurrencies are no different. Bitcoin shed half of its peak value through July but remains up 50% for the year. Ether, another popular cryptocurrency, has held up better, rising threefold in 2021. But rather than stomaching crypto losses, financial advisers are pitching investors a way to use them to offset investment profits elsewhere.

Here’s The Pitch: Investors can buy bitcoin, ether and other cryptocurrencies through their broker. If cryptocurrencies fall by a certain amount, the accounts are set to automatically sell the digital coins, generating a taxable loss that can be used to offset other investment gains. The accounts then buy the coins back in a short time for around the same price or even less.

Doing this is a no-no with stocks, bonds, options and many other securities, thanks to the “wash sale” rules that restrict capital-loss deductions when investors purchase an asset within 30 days of selling it for a loss. Cryptocurrencies evade the rules because they are considered property by the Internal Revenue Service. But that is likely to change soon.

The House Ways and Means Committee approved a proposal to treat cryptos like other securities that, if enacted, would kick in Jan. 1. Lawmakers project that the proposal, which is part of a package of proposed tax increases to help pay for the $3.5 trillion budget bill still being negotiated, will raise $17 billion over a decade.

‘You have to believe in [crypto investing] long term to make sense, but if you invest long term, you might as well benefit from the volatility.’
— Michael Durso, a co-founder of ShoreHaven Wealth Partners

Michael Durso, co-founder of ShoreHaven Wealth Partners, said he started offering managed crypto accounts to clients earlier this year. He held a webinar with the product’s creator, crypto asset firm Eaglebrook Advisors, in early spring, where nearly 250 people of all ages signed up to hear how they could buy digital coins through their brokerage accounts. A handful put between 1% and 2% of their assets into cryptocurrencies, he said.

“I say to clients you have to be comfortable losing all of it,” Mr. Durso said of crypto investing. “You have to believe in it long term to make sense, but if you invest long term, you might as well benefit from the volatility.”

Mr. Durso is part of a growing class of crypto-savvy wealth managers. A survey of 529 financial advisers conducted by the Journal of Financial Planning and the Financial Planning Association earlier this year found that 14% were currently using or recommending cryptocurrencies, up from less than 1% in 2020. More than a quarter said they plan to increase their use of cryptocurrencies over the next 12 months.

Anyone can buy digital currencies by creating a trading account with a crypto exchange such as Coinbase or Gemini. But a big selling point of the managed accounts is the automatic tax-loss harvesting feature, Mr. Durso and other advisers said.

They added that the savings from the feature usually more than cover the product’s 1.3% annual fee (which doesn’t include what a financial adviser also charges). Investors trading on their own on Gemini have to manually sell and buy back cryptocurrencies to create the same effect.

Mr. Durso said that one of his clients bought $100,000 of bitcoin and ether this year and set the account to harvest losses whenever either slid at least 5%. Since doing that, the client has racked up $30,000 in losses, which he will use to offset big gains in some stocks. Meanwhile, he has gained 10% on his crypto investment.

Many wealth managers have said they don’t handle direct investments in crypto. For some advisers, the only option they offer crypto-hungry clients are funds such as the Grayscale Bitcoin Trust, which goes by the ticker GBTC.

But Grayscale requires investors to meet metrics to be considered accredited, a minimum $50,000 investment for entry and an agreement to hold shares for more than a year—all barriers that don’t exist with Eaglebrook’s managed crypto accounts. Besides that, trusts like Grayscale have struggled to trade in line with the value of their bitcoin holdings.

“The biggest problem with GBTC is you don’t actually hold the coins,” said Ahmie Baum, who runs Interchange Capital Partners, a wealth-management firm loosely affiliated with Mr. Durso’s through a confederation of independent practices under Dynasty Financial Partners.

He started moving some of his clients out of Grayscale’s fund and into managed accounts earlier this year. For new clients, Mr. Baum said he recommends they put a small allocation of money into the Eaglebrook product unless they object.

“If I can save capital-gains taxes by taking advantage of the volatility in crypto, I can increase returns in the portfolio,” Mr. Baum added.

More than 400 financial advisers have put over $100 million into Eaglebrook’s managed crypto accounts, said Christopher King, chief executive at the firm. Most of those advisers work independently like Messrs. Durso and Baum, but he wants to eventually get his product used by major brokerage firms.

It competes with a few other firms in the nascent managed-crypto-accounts business, including Blockchange Inc. and Willow Crypto.

Mr. King expect inflows to take a hit if lawmakers on Capitol Hill end up applying the wash-sales rule to cryptocurrencies.

“The tax optimization might go away. It most likely will, but a decent amount of people will still want to own cryptocurrencies,” Mr. Baum said.


Updated: 10-5-2021

What Took Place At The Financial Advisor’s Bitcoin Conference

As more investors get interested in crypto, financial advisors need the tools to understand bitcoin and digital assets – and how they’re changing.

On Wednesday, Oct. 6, starting at 9 a.m. ET (6 a.m. PT), CoinDesk will host Bitcoin for Advisors 2021. Focused on the changing financial landscape, the annual event aims to equip advisors with the tools to best understand how bitcoin, ethereum and other digital assets can successfully impact their clients’ portfolios.

Once again, Bitcoin for Advisors will be an online-only event. Like with other recent online events from CoinDesk, we anticipate some exciting announcements and insights from our guests.

While the sessions will mainly focus on the basics of bitcoin, they’ll take a deep dive into practice management, portfolio theory, and even decentralized finance (DeFi). We’ll be live-tweeting the event as it happens on Wednesday, of course.

Bitcoin’s Changing Narrative

In many ways, bitcoin has become less of a speculative asset since the first Bitcoin for Advisors conference in 2020 — certainly when compared to years prior, during which the industry rallied around the “institutions are here” narrative only to have been met with a bear market that brought bitcoin from ~$20,000 to ~$3,000 in 2018.

Yet, somehow in the midst of a black swan event that spurred a global pandemic, lockdowns and unfettered quantitative easing, the institutions are, indeed, finally here. Which means financial advisors (FAs) and registered investment advisors (RIAs) are not too far behind, right?

Well, the headlines may say one thing, but what’s top of mind for advisors right now when it comes to looking at crypto assets for their clients? What’s the biggest challenge they face as we sit here today? We hope to answer these questions and more at Bitcoin for Advisors.

Here’s Some Of What We’re Looking Out For At The Event:

Highly acclaimed financial advisor Ric Edelman is the event’s first keynote. Edelman built the biggest independent advisory firm in the nation and is on a mission to be the face and bridge between old money and new.

Delays On A Bitcoin ETF

According to Edelman, a bitcoin exchange-traded fund (ETF) is inevitable, and it’s already arrived in other jurisdictions (notably Canada). However, delays in the U.S. as well as other significant barriers have led financial managers to sit on their client’s cash as the dust settles. In his talk at Bitcoin for Advisors, Edelman hopes to remove the mystery about blockchain and digital assets and help advisors to “get off zero.”

But advisors need more than a man on a mission, they need a multifaceted approach that resonates with their practice and clients. That’s why the conference will explore compliance, practice management and tax implications – the whole package.

How Advisors Can Approach Digital Assets

Another keynote speaker will offer a nerd’s perspective on the financial planning world. (Yes, we’re talking about Michael Kitces.) Kitces, who is famous for his “Nerd’s Eye View” blog, takes a bit of a more cautious approach to bitcoin. On one hand, he notes, advisors can’t fall behind and not learn about digital assets; on the other hand, the jury is still out.

Nonetheless, advisors will leave this event with a new vocabulary and a better understanding of the cryptocurrency landscape.

With the ever-expanding crypto market attracting the attention of Janet Yellen, Elizabeth Warren and Gary Gensler, the financial planning world has no choice but to adapt or be disrupted.


Updated: 10-6-2021

How To Invest In Crypto Without Buying Any

Cryptocurrencies are inherently cryptic — it’s right there in the name. And if you follow Warren Buffett’s advice to never invest in businesses you can’t understand, it may be hard to justify investing in a currency made of math instead of gold.

But it’s also hard to ignore some cryptocurrencies’ astounding performance : The price of one bitcoin jumped from just under $5,000 in March 2020 to over $60,000 as of this April.

The excitement surrounding digital currency may leave some investors feeling like the lonely kid at the pool party, wanting to join their friends having fun in the deep end, but too nervous to jump in.

For those investors who are cautiously curious, here are ways to gain exposure to cryptocurrency without buying it, and if you do decide to purchase, how to lower your risk.

Invest In Companies With Cryptocurrency Holdings

Think of this strategy as cryptocurrency investing once removed. Some publicly traded companies have cryptocurrency holdings. And because they are betting on its success, you can too, with those companies acting as a buffer.

“When you’re thinking about investing in a company because they have exposure to crypto, it really runs the gamut from how direct or indirect you are in terms of that exposure,” says Douglas Boneparth, a certified financial planner and president of Bone Fide Wealth in New York City. “It just depends on how much of their balance sheet is in crypto.”

Checking a company’s balance sheet can be revealing: As of June 30, 2021, Tesla held $1.31 billion in digital assets. And while the tech giant has received lots of media attention for its investment, that $1.31 billion currently equates to only about 2.4% of Tesla’s total assets . But if those assets balloon in value, as cryptocurrency is sometimes wont to do, Tesla’s stock value could too.

Invest In Cryptocurrency Infrastructure

Another way to gain exposure is to invest in companies that have a stake in the cryptocurrency industry. Coinbase is a platform where investors can buy and sell cryptocurrency — and it’s publicly traded .

“Just like you have with gold, you can either invest in the commodity itself or the infrastructure around it, the miners, the materials needed for mining, same with energy and oil,” Boneparth says. “And there are public companies that are specifically operating in the blockchain space, but there’s not many of them.”

Riot Blockchain Inc. is one of those few publicly traded companies that focuses on cryptocurrency mining. Riot Blockchain, among others, helps build cryptocurrency infrastructure and provides another cryptocurrency-adjacent investment opportunity.

Get Ready For A Cryptocurrency ETF

While there are currently no cryptocurrency exchange-traded funds that have been approved by the Securities and Exchange Commission, there is demand for them. A cryptocurrency ETF would operate much like any other ETF, but instead of tracking a market exchange like the S&P 500, it would track a cryptocurrency. For instance, a bitcoin ETF would track the price of bitcoin.

“There’s been many different attempts at ETFs and many of these have been rejected. There are ETFs in other countries for bitcoin that have been permitted, and I think it’s just a thing that will happen in time,” says Tristan Yver, the head of strategy at FTX.US, a U.S.-regulated cryptocurrency exchange.

“I don’t have an estimate of when this will occur, but I do think it’s something that will happen, and I think it’s something that will allow people who aren’t comfortable with investing directly in digital assets to get exposure to bitcoin and other cryptocurrencies.”

There have been numerous applications for cryptocurrency ETFs, and the SEC is expected to decide whether to approve investment manager VanEck’s bid for a bitcoin ETF, which could be the United States’ first such fund, on Nov. 14, 2021.

Use Caution If Investing Directly

If you’re willing to invest in cryptocurrency directly, there are a few ways you can mitigate your risk. One way to do this is to reduce the amount of money you invest. Some credit cards offer cryptocurrency rewards in a similar way as cash back or miles. If you decide to add cryptocurrency to your portfolio by way of rewards, you don’t even have to use your own dollars to do so.

Another way to reduce your risk is to invest in stablecoins, which are similar to traditional cryptocurrencies but are backed by real-world assets, making them less prone to significant drops in value.


Updated: 10-7-2021

Crypto Exposure Has Positive Impact On Investment Portfolios, Study Shows

The study also concluded that temporary crypto market decline and volatility are not enough to diminish the importance of cryptocurrencies in investment portfolios.

Allocating funds to crypto investment positions has been shown to have a positive impact on the performance of diversified investment portfolios.

According to a research study by crypto asset management outfits Iconic Funds and Cryptology Asset Group, the ability of crypto investments to positively impact the performance of investment portfolios cuts across several asset allocation models.

Crypto’s ability to improve the profitability of diversified investment portfolios comes despite its volatility, especially the recent market crash that occurred in May.

The research study titled “Cryptocurrencies and the Sharpe Ratio of Traditional Investment Models” examined changes in the risk-return profile of several portfolio allocation methods due to the addition of cryptocurrency assets.

This risk-return examination was conducted via measuring changes in the Sharpe ratio — the measure of excess returns earned for holding a volatile asset — when crypto positions were included in the different asset portfolio models.

With crypto supposedly an uncorrelated asset class, the risk-reward performance of investment portfolios should improve with the addition of cryptocurrencies despite their apparent volatile price movements.

By assuming a passive investment strategy, the study mapped the changes in the Sharpe ratio for traditional portfolio models with the introduction of crypto exposure against a reference index with no cryptocurrency allocation.

To investigate the impact of increasing the crypto positions for each portfolio model, the study also rebalanced the cryptocurrency allocation on a 1%, 3% and 5% basis.

Detailing its findings, the study stated, “This report finds that the addition of cryptocurrencies to any portfolio covered had a positive impact on the returns as well as the risk-reward performance of the portfolio,” adding:

“This finding holds despite a significant correction in the crypto markets during the beginning of 2021. Furthermore, the addition of more cryptocurrencies led to even higher returns.”

According to the document, the results of the 2021 study also lend credence to the conclusions drawn in the 2020 research that showed the positive impact of crypto allocations to investment portfolios despite the market crash of mid-March.

Crypto exposure is becoming a significant trend among institutional investors. As previously reported by Cointelegraph, a recent Bank of America report showed 20 major public companies in the United States having significant digital asset-based investments.

Back in September, a survey by European investment management outfit Nickel Digital Asset Management stated that 62% of global institutional investors with zero crypto exposure will begin making forays into cryptocurrency and blockchain within the next 12 months.

Revolution, Macro And Micro: Three Ways To Look At A Bitcoin Investment

Understanding the three main investment theses of bitcoin will help you not only allocate to it for clients but also parse through cryptocurrency news, analysis and commentary.

Investment in cryptocurrencies is all the rage, and bitcoin is clearly the biggest – it has the largest market capitalization, the most infrastructure, the longest track record and is the most decentralized.

In previous columns, I’ve stressed the conversations you, as an advisor, will need to have with clients, and how different they are from any conversations you’ve previously had to have about financial planning.

Now, we get to talk about three different ways to look at an investment in bitcoin for you and/or your clients: bitcoin as the revolution, bitcoin as a macro investment and bitcoin as a micro investment.

I’ll review these three investment theses so you can not only determine why to allocate to bitcoin, but also so you can help your clients better understand the implications of certain news items, media hype and social media posts.

You and your clients will inevitably read articles and posts from people who fit into all these categories. Having an understanding of where they’re coming from will help you in your practice. (Keep in mind that we can’t necessarily lump every investor or every thesis into one of these three categories.)

Bitcoin As The Revolution

This was really the original “investment” in Bitcoin. Starting shortly after the release of the Bitcoin blockchain’s white paper in 2008, people were mining bitcoin using their home computers and felt like this new currency would be needed sometime in the future.

They likely didn’t think it would be worth in the mid-five figures someday, nor did they think of it in institutional investor terms. They held it in private wallets long before we had crypto custodians, and even used it for early transactions – like the infamous bitcoin pizza and Silk Road.

Along the way, others have started investing in bitcoin as a hedge against governments, censorship and overly powerful banks.

The revolution investment thesis is that, when fiat currency, governments and banks fail or falter we can count on bitcoin. Because bitcoin is completely decentralized, the value isn’t determined and possibly manipulated by a central bank and the transfer can’t be restricted.

While this doesn’t seem to be much of a need here in the U.S. and most of the developed world, we can see the value in countries where the government might routinely devalue their own currency to pay down national debt or limit withdrawals from banks. We’ve seen relatively recent examples in Turkey, Argentina and Nicaragua.

If I’m living in one of those countries, or I just don’t trust many of the world leaders, I might own bitcoin and store it offline in a hard wallet. I know that my bitcoin is wherever I am.

The revolution investment thesis might not be just because I think I’m going to need bitcoin to trade for goods and services, but because I just want to show my disgust with the current government and banking system. So I’m not going to let them participate in my wealth creation and growth.

While this investment thesis in bitcoin might be out of necessity, or out of revolution, its proponents are vigilant about letting the public know they should hold bitcoin. Many of the arguments hinge less on actual macroeconomics driving the dollar value and more on the need to own bitcoin as a hedge against powerful parties and as a political statement.

Bitcoin As A Macro Investment

This investment thesis looks at bitcoin as a store of value, and compares the macro economic factors at play in the U.S. and in the world. The thought behind it is that as we see inflation rise due to the increased supply of fiat currency, the value of bitcoin will rise dramatically because bitcoin has a very fixed supply.

This is the thesis that many bitcoin investors have been following for years, but it became very popular and well-known in 2020,when legendary macro hedge fund manager Paul Tudor Jones announced he was allocating some of his portfolio to bitcoin. He was followed shortly by Stanley Druckenmiller and Bill Miller, who are also macro investors.

The fiat money printing in the U.S. and in most of the Western world as a result of the COVID-19 pandemic accelerated the potential for inflation, as we have seen trillions more dollars created and dispersed into the economy. Now, we have finally started to see evidence of inflation, which adds fuel to this bitcoin investment thesis.

Why would I need to hold bitcoin as an inflation hedge or store of value? Let’s assume I can hypothetically buy a loaf of bread for $1 today. In a year, what if that same loaf of bread cost me $1.05 – which means we had 5% inflation? That happens because we added more dollars, but not more bread, to the system. Therefore, the bread is worth more dollars.

If I keep all my money in dollars in the bank (where I’m earning virtually no interest), I can’t buy a loaf of bread in a year with my $1. If I think that will happen, I’ll want my money saved in an asset that also has a limited supply, just like the bread.

In the past that asset might have been gold. Now, however, we have an asset with a very limited supply, which is very easy to buy and keep safe (compared to physical gold).

I can hold my dollar in bitcoin, and in a year I would assume the price of my bitcoin would go up by at least the same amount as the bread. Therefore, if I need to buy bread, I can sell my bitcoin for at least $1.05.

Now, extrapolate that investment over the entire world economy and we can see why these titans of macro investing want to allocate 2%-5% of their holdings to bitcoin. They see inflation coming and they want an asset with finite supply that will increase in value with a decrease in dollar value.

When you or your clients read about an increase in inflation leading to a possible increase in value of bitcoin, or about institutions like insurance companies and pensions investing in bitcoin, this is usually the thesis they’re using.

Bitcoin As A Micro Investment

This is where most advisors are going to stand with their clients. Your role here is to identify, based partly on the previously mentioned investment theses, how to help your clients allocate to bitcoin.

Based on the risk profile, technical prowess and time horizon of your clients, you can assess not only the allocation to bitcoin but also the treatment of the asset – when you trade, how often do you rebalance, etc.

Remember that many of those institutions investing in bitcoin for the inflation hedge have a very long or even infinite time horizon. Your clients have a limited time horizon, and each will be different. If your clients are in their early 40s, you’re probably talking to them about the impact inflation will have on their retirement funds.

If we also assume you subscribe to the inflation hedge thesis above, bitcoin fits as part of your clients’ retirement planning, at a reasonable allocation based on their risk tolerance.

The volatility of bitcoin also allows for an investment when thinking about it for individual clients. Because bitcoin is not correlated and highly liquid, you have the ability to rebalance, possibly quarterly, and provide clients with overall portfolio returns that are more normalized.

This bitcoin micro investment thesis is about taking the possible effects on the price of bitcoin and adapting them to individual family portfolios, with more limited time horizons, necessary expenses and traditional assets.

Using These Investment Theses As A Lens

As you start to learn more about bitcoin, and even to help your clients with allocations to crypto, you will definitely hear from “influencers,” analysts and bitcoin enthusiasts about the reasoning for holding or not holding bitcoin.

Your role as the advisor is to understand these main investment theses, and you have the ability to determine how any opinions or analysis affects your clients’ portfolios and financial lives. If you see an influencer or analyst or the news through the lens of one of these investment theses, you’ll be better prepared to have those important conversations with your clients.

How Advisors Can Add Value To Clients With Crypto

Being a crypto-competent advisor can help to differentiate yourself from other financial professionals and add value to your client relationships and practice.

Clients work with you because you are their trusted advisor. You bring value to the client-advisor relationship in myriad ways and, hopefully, you are fairly compensated for the work that you do on behalf of your clients.

Now there’s growing interest from investors in cryptocurrencies. This is a movement that started on the retail investor side and has seen slow uptake on the institutional side and by investment professionals. In fact, it’s been my experience there aren’t enough financial advisors who are competent in crypto.

This column originally appeared in Crypto for Advisors, CoinDesk’s new weekly newsletter defining crypto, digital assets and the future of finance. Sign up here to receive it every Thursday.

There’s a good chance your clients are investing/speculating in crypto right now and not talking to you about it. That’s a problem, because if you can’t or don’t want to have a conversation with your clients about it then the trust you’ve worked so hard to build over time will start to erode.

To be more blunt, if you can’t meet your clients – or prospective clients – where they’re at, then they’re going to look elsewhere for advice.

So How Can You Help Clients Who Come To You Seeking Your Advice On Crypto? Here Are A Few Steps I’d Recommend To Start Off:

* Educate yourself and keep up to date on what’s happening in this sector. If you’re reading this article you’re in the right place! Use resources like CoinDesk, other media outlets, Medium and Twitter.

* If you’ve never owned crypto before, buy a nominal amount, because the best type of learning is experiential. Download a digital wallet to your computer or smartphone, transfer a small amount of money – nothing you’d lose sleep over at night – to the wallet; buy ether (ETH); then buy a non-fungible token (NFT) on one of the many marketplaces available to buy and sell these digital assets (remember to report the capital gain or loss on your tax return because you’ve just likely had a taxable event).

You can even make your own NFT and sell it (again, that’s a taxable event, so be sure to report it to Uncle Sam). If you have some ETH left over, you can lend it out and earn more ETH – of course, the taxman gets a cut of that, too!

* Keep an open mind. Don’t discount any ideas, and try to listen much more than you speak. The crypto space is evolving quickly so you will likely learn something new just by listening to what your clients are into, which in turn can only help deepen your connection with them and further enhance your client-advisor relationship.

If You Feel Like You’ve Got 1 Through 3 Down Pat, Then Here Are Some Questions You’re Likely To Encounter, Or Should Be Thinking About:

* In what ways can you get your clients exposure to cryptocurrency? Options include direct exposure to the token or coin, indirect exposure via derivatives such as futures contracts, hedge funds, venture funds, index funds, trusts and stocks of companies that are directly or indirectly tied to cryptocurrencies and blockchain technology.

Currently, there are no crypto exchange-traded funds (ETFs) in the U.S., though this is likely to change at some point in the future.

* How much, if any, of your client’s portfolio should be allocated to cryptocurrency, and to which coins or tokens? There’s no cookie-cutter answer to this one.

Factors to consider include the client’s level of sophistication with respect to this asset class, their ability to take on risk and withstand potential losses, and which projects or protocols they find most interesting or have strong convictions about.

* How should your clients custody their crypto holdings? The two most common methods are to self-custody with a hardware wallet or paper wallet (cold wallet), or to keep the crypto on an exchange (hot wallet). Each option has its pros and cons, which you can help your clients work through.

For example, cold wallets can be a more secure way to store crypto because they’re not as susceptible to theft via hacks as hot wallets; the downside is that they’re not as easy to use and can be lost easily if not stored and managed properly.

* What are the tax ramifications of transacting in cryptocurrency? This is fairly straightforward (though there are some nuances of which the uninitiated might not be aware). There are misconceptions about what triggers a taxable event and is therefore reportable on a tax return; for example, one of the more common fallacies is that like-kind exchanges of crypto prior to Jan. 1, 2018, are not taxable events.

The Internal Revenue Service has devoted, and continues to devote, resources to cracking down on taxpayers who under-report or don’t report any of their crypto gains, as this is an area rife for enforcement.

As you know, there is no one-size-fits-all approach to investing (crypto is no exception), so an exploration of answers to these questions with your client can certainly deepen the relationship and further solidify your status as trusted advisor.

Having an open dialogue with clients about these questions as well as any other questions or concerns that may arise during the course of a meeting, continuing your education about crypto, and understanding risk and investor behavior can easily demonstrate the value that you bring to the table.

As cryptocurrency is more broadly adopted by investors, financial advisors will increasingly field more questions from clients about crypto assets, so you need to be prepared to have those conversations.

Getting Paid For Your Advice On Crypto Assets

The next piece of this is, how do you get paid for the advice you provide to your clients? If you charge clients an asset-based fee for your services, it can be more challenging to charge for your advice based on the value of your client’s cryptocurrency holdings because these digital assets tend to be highly volatile, and there aren’t a lot of investment vehicle options available to financial advisors (though this is rapidly changing).

There are a growing number of financial advisors and their firms (though still a minority as compared to advisors who charge an assets under management fee or are compensated via commissions) who utilize a fee-for-service model, whereby they charge clients a flat fee or time-based fee (i.e., hourly).

Fee-for-service models tend to work well with respect to advising on crypto assets as compared to more traditional fee models, because the pricing structure is straightforward and transparent. It also gives advisors greater flexibility to charge on assets that are under advisement but are not discretionarily managed, which is often the case with cryptocurrencies.

Key Takeaways

Many investors don’t understand crypto and think it has no place in their portfolios. But an increasing number of investors are curious about crypto and want exposure (especially those who are younger, well-educated and with higher incomes).

We’re in the midst of the greatest wealth transfer in our lifetime, and as those assets get passed, the inheritors are likely to ditch their parents’ financial advisor and invest some of their newfound wealth in crypto. Accordingly, financial advisors need to adapt, lest they become irrelevant.

Because there are few financial advisors who will work with clients who hold crypto or are thinking of buying these digital assets, you have an opportunity to really stand out from the crowd of undifferentiated financial professionals. Working with clients who are interested in crypto can be a wide, blue ocean strategy for advisors who are willing to take the plunge.


Updated: 10-22-2021

Why Your Adviser Might Start Talking Up Bitcoin

The advent of bitcoin-related ETFs makes it easier for financial professionals to help you add crypto to your portfolio. It also lets them earn fees on it.

Some days it seems just about everybody is urging you to buy bitcoin. Now, your financial adviser might, too.

This week, the first cryptocurrency-focused exchange-traded fund in the U.S., ProShares Bitcoin Strategy ETF, raised $1.1 billion in its first two days of trading. Advisers who want to buy bitcoin directly for clients have to clear some onerous regulatory hurdles first; in comparison, buying a bitcoin-related ETF is as easy as breathing.

That could give some financial professionals the entree into crypto they have long craved. If you’ve been suffering from FOMO lately, just imagine their fear of missing out.

Millions of individual investors already own bitcoin or other digital currencies. Many have racked up gains of 400% or more over the past year. Alongside that, the stocks and ETFs that advisers typically recommend can feel like fossils.

In a recent survey by Bitwise Asset Management, an investment firm in San Francisco, 81% of financial professionals said clients had asked in the previous 12 months about investing in crypto. Nearly three-quarters said clients already own, or might own, digital assets.

Only 9% said they already have put some of their clients’ assets in cryptocurrency. But 17% of the financial professionals who haven’t yet bought any crypto for clients said they would in 2021—more than double last year’s number.

“Advisers feel the pressure,” says Ben Cruikshank, head of Flourish, a subsidiary of Massachusetts Mutual Life Insurance Co. “They feel the need to offer things clients are looking for, even if it makes them uncomfortable.”

Flourish provides specialized financial services to advisers, including making cryptocurrency available for their clients.

The advent of bitcoin-related ETFs in the U.S.—the ProShares fund is likely the first of many—makes offering crypto easier for advisers. It also lets them earn fees on it.

So will a new service from Interactive Brokers Group Inc., an online brokerage based in Greenwich, Conn. The firm announced this week that it will permit financial professionals to trade bitcoin and several other digital currencies through its platform.

Interactive Brokers acts as a custodian—safekeeping assets, handling trades and maintaining records—for more than 5,700 advisers with a total of $60 billion in clients’ assets.

Its new service will enable advisers to buy crypto for their clients and report it on the same account statement as conventional assets like stocks, bonds and ETFs.

Interactive Brokers’ chairman, Thomas Peterffy, tells me that “we did get hundreds of calls from [advisers] and are following up, while new calls keep coming in.”

Until now, financial professionals generally haven’t been able to manage clients’ digital assets alongside other holdings.

That’s made it hard to know how much risk their clients are taking, how to minimize their taxes and how to help them plan for retirement. Services like Interactive Brokers’ new offering should change that.

One adviser found out not long ago that a client who held $3 million in assets with him also had $11 million in crypto, says Tyrone Ross, chief executive and co-founder of Onramp Invest Inc., a San Diego-based firm that helps advisers with digital-asset management.

Maybe you’ve never owned any cryptocurrency and don’t want to. Maybe you haven’t yet but you might. Maybe you already do. What should you be on the lookout for if your financial adviser brings it up?

First, beware of anyone flogging a new bitcoin-related ETF. The new ProShares fund and those sure to follow don’t hold digital currency; instead, they own futures contracts, whose returns can deviate widely from it. ETFs owning bitcoin itself haven’t arrived yet in the U.S.


Updated: 10-26-2021

Billing for Advisers Can Be ‘Smart,’ Too (Podcast)

Updated: 10-27-2021

Crypto Fever Could Put Financial Advisers In A Bind

Clients can be counted on to exert pressure to include digital currencies in their portfolios but then look to place blame for any losses.

For financial advisers, cryptocurrencies just might be internet 2.0.

Many advisers I know who were active during the dot-com mania in the 1990s have described the experience this way: “Clients wanted internet stocks and tech IPOs. If I gave them what they wanted, they could lose money. If I didn’t, I could lose a client.”

Cryptocurrencies may soon put advisers in a similar bind. Once a fringe movement of blockchain visionaries, monetary futurists and conspiracy theorists, cryptos have spilled into the mainstream.

According to a University of Chicago poll conducted in June, 13% of Americans surveyed said they bought or traded cryptocurrencies during the previous 12 months, slightly more than half the number who said the same about stocks.

And that’s almost certainly just a preview of crypto fever. Two-thirds of those surveyed said they haven’t bought cryptocurrencies because they don’t know how, or they have concerns about security. The two Bitcoin exchange-traded funds that debuted in the U.S. last week go a long way to removing those barriers, and more are set to follow.

Sprinkle in the surging prices of Bitcoin and other cryptocurrencies — and the inevitable FOMO that stirs up — and it’s a recipe for another speculative mania.

The ecosystem of custodians, brokers and technology providers that supports advisers is counting on it.

Last week, Interactive Brokers began offering advisers custody and trading access to four digital coins, including Bitcoin, warning that, “If your clients haven’t started asking you to add cryptocurrencies to their portfolio allocations it’s likely that they will soon.”

U.S. Bank began offering crypto custody for big money managers earlier this month. And technology providers that cater to advisers are offering to “educate” them about cryptocurrencies so they can sell them crypto-related analytics. The message is clear: Get hip to cryptos or get left behind.

But unlike the dot-com days, advisers probably won’t be swamped by crypto-crazed investors. The internet boom was all about stocks, so it made sense to call an adviser, or more likely a broker in those days.

Investors also had little choice because online trading was new and not yet widely adopted in the 1990s.

Today, no one needs an adviser to buy cryptocurrencies, particularly now that crypto ETFs have arrived.

Crypto enthusiasts also tend to be younger and therefore more likely to open a trading app than call an adviser. For the first time last spring, new customers of popular trading app Robinhood Markets were more likely to make their first trade in cryptocurrencies than stocks.

Some younger investors avoid traditional investments such as stocks and bonds altogether, viewing them as relics of an antiquated and out-of-touch financial industry they derisively call TradFi. They’re right about one thing: Most investment professionals don’t know squat about cryptocurrencies.

That may explain why advisers I’ve spoken with have had few conversations about cryptocurrencies with investors.

It may also explain why only 5% of those polled in Chicago’s survey said they haven’t invested in cryptos based on advice from a financial professional.

Advisers are fiduciaries, the highest legal standard of care in money management, so they tend to be wary of untested or speculative investments. If more people haven’t received a stern warning about cryptos from advisers, it’s probably because they haven’t asked.

Asked or not, however, as interest in cryptocurrencies grows, advisers will feel increasing pressure to slide them into clients’ portfolios, even if it’s just window dressing. No responsible portfolio manager would allocate more than a small percentage to cryptocurrencies at this point, so it won’t make a big difference win or lose.

Still, it would be a tricky balancing act for advisers. If cryptocurrencies continue to surge, clients will ask why they don’t own more of them. And they’ll be even less forgiving if cryptos disappoint. Investors tend to feel the sting of losses more intensely than the thrill of gains.

Bitcoin has already experienced several busts in its short life, and many other cryptocurrencies are newer and untested. If cryptos face a wipeout like the one that hit internet stocks from 2000 to 2002, clients will want to know what cryptos are doing in their portfolios.

That’s a lesson from the dot-com era advisers would do well to remember. When internet stocks collapsed, the zeitgeist quickly changed from “every smart investor must own internet companies” to “how could we have been so stupid?”

Investors blamed the entire financial industry for their losses, from brokers to stock analysts and mutual funds to banks, many of whom profited handsomely from the madness.

The industry sees another gold mine in cryptocurrencies. The two Bitcoin ETFs that launched last week, ProShares Bitcoin Strategy ETF and Valkyrie Bitcoin Strategy ETF, charge 0.95% a year, nearly double the average expense ratio for ETFs and 30 times the cost of a broad market index ETF.

Another notable lesson from the dot-com era is that spotting a transformative technology and profiting from it are entirely different things. Most people understood the internet would change everything, and it did.

But that didn’t stop investors from losing money on internet companies that went bust or failed to live up to expectations, some of which were among the most valuable companies in the world in the late 1990s.

I don’t doubt there are investment professionals who genuinely believe cryptocurrencies are a great investment — and who knows, maybe someday I’ll be among them.

But advisers who venture into cryptos should be prepared for some hard questions if digital currencies encounter their own reckoning. In that moment, few investors will care that the blockchain truly did change the world.


Updated: 11-3-2021

Money Managers With Zero Crypto Exposure Risk Being Left Behind

Crypto has grown to become a $2.7 trillion asset class, with Bitcoin, Ether and DeFi attracting more institutional interest.

The career risk surrounding cryptocurrency is shifting to money managers who don’t have exposure to digital assets as opposed to those who are already invested, highlighting a dramatic shift in the institutional acceptance of Bitcoin (BTC) and decentralized finance, according to Bloomberg’s senior commodity strategist Mike McGlone.

The November edition of Bloomberg’s Crypto Outlook described 2021 as just another foundation year for the cryptocurrency market, further underscoring the long-term value proposition of digital assets.

In this environment, money managers “risk falling behind and underperforming peers who own crypto assets,” wrote McGlone, adding:

“Our graphic depicts the 200%-plus outperformance of the Bloomberg Galaxy Crypto and DeFi indexes in 2021 vs. the S&P 500.”

Although crypto exhibits much higher volatility than traditional investments, selloffs in assets such as Bitcoin and Ether (ETH) “appear to be attracting responsive buyers, most of which face the potential of falling behind by avoiding crypto allocations.”

McGlone further explained that “managers are expected to catch big trends ahead of the masses,” a feat that becomes much more difficult if they rely on traditional portfolio strategies, such as allocating 60% to equities and 40% to bonds.

Many wealth managers have warned that the traditional 60–40 portfolio is no longer sufficient in today’s market.

As Cointelegraph reported in early October, McGlone correctly predicted the early stages of Bitcoin’s fourth-quarter breakout, arguing that the $50,000 resistance had likely flipped to support. The analyst said $100,000 BTC was in play for 2021 — a view that was reiterated in the latest report.

At the time of writing, the flagship cryptocurrency was worth $62,080, according to Cointelegraph Markets Pro. Bitcoin peaked above $67,000 in October before correcting lower.

Investment managers and financial advisers are expected to play a bigger role in the cryptocurrency market, according to Grayscale’s Michael Sonnenshein, Amber Group’s Jeffrey Wang and Tyr Capital’s Edouard Hindi.

In the first quarter, Cointelegraph interviewed the three executives to gauge institutional interest in crypto investments. In their view, the “career risk” of investing in crypto had diminished considerably. The final domino, according to Edouard Hindi, could be fiduciary standards:

“Now that custody and regulatory barriers are slowly dropping, what could still be hindering a broader adoption of crypto by financial advisors is the perception that ‘fiduciary standards’ remain a challenge in openly advocating for the asset class to be included in customers’ portfolios.”


Updated: 11-4-2021

Why The Advisor Crypto Technology Gap Is Closing

Cryptocurrency technology and infrastructure developed first for the individual investor. Today, advisors have the most of the same capabilities and opportunities as do-it-yourselfers.

When I first became aware of cryptocurrencies a little more than a decade ago, no one I knew was investing in them.

That changed quickly as people around me began to buy, hold and trade crypto, using trading and custody tools that quickly became more sophisticated and kept changing on pace with technology in general.

But when I first started writing for financial advisors in 2015, I witnessed a completely different picture – there were no mainstream tools for advisors to work with cryptocurrencies, and much of the technology that did exist looked like Flintstones appliances compared with the tools that traders and do-it-yourselfers were using.

A Gap Opens

When bitcoin was launched in 2009 and cryptocurrencies burst into the global financial consciousness, the individual, the do-it-yourself investor, gained a technological advantage over the average advisor, mostly from being a first mover.

Today, that gap between individual investor and advisor has almost closed as new tools and platforms are rolled out for financial planners, enabling them to advise clients on and work directly with cryptocurrencies. The traditional financial industry is finally catching up.

“Cryptocurrencies as an industry and asset class began with people going individually into tokens, but now there’s an asset management and advisor infrastructure being built,” said Henry Yoshida, co-founder and CEO of Rocket Dollar, which provides self-directed retirement accounts to individuals who want to use their retirement savings to invest in any alternative asset, including crypto.

Yoshida is a former Merrill Lynch advisor who went on to found MY Group LLC, a retirement advisory firm with $2.6 billion in assets under management and then robo-advisor Honest Dollar, which was acquired by Goldman Sachs.

“Traditionally, regular people could only purchase mutual funds, and only advisors and an exclusive group of investors could buy stocks and bonds and other assets,” he said “It’s the exact opposite in crypto; it started with the people first, and only now are we getting the technology, regulations and infrastructures for advisors.”

Closing The Gap

Dan Eyre, CEO of Blockchange, an asset management program and separately managed account (SMA) platform for digital assets, said that the technology to open advisor access to cryptocurrencies already existed in 2009, but few of the larger players in advisor technology and custody services took the asset class seriously.

“These tools should have been there all along, but until last year, a lot of the bigger players didn’t see a lot of legitimacy in the asset class and were kind of waiting, hoping for it to die out,” said Eyre. “By the time it really caught on, they were behind the curve, while the innovators were further ahead. It’s because this asset class is fundamentally new. It’s not repackaging something that already existed, it’s rebuilding it from the ground up.”

For one thing, Eyre said that traditional custody and access tools and infrastructure don’t work well for digital assets because digital assets are traded frequently and on a round-the-clock basis.

Blockchange is built on top of crypto exchange Gemini’s custody and infrastructure offerings.

Through a recently announced partnership with Equity Trust, the company now offers access to Automated Customer Account Transfer Service (ACATS)-eligible individual retirement accounts, which reduces the waiting period to transfer assets into an IRA – an important consideration when investing in markets that move as fast as cryptocurrencies do.

Gemini’s offering makes it possible for advisors to access and work within their clients’ cryptocurrency accounts.

Onramp Invest, another service offering similar side-by-side access for advisors and the end investor, launched in July.

Giving Crypto A Familiar Face

Blockchange, for example, also gives advisors the ability to customize its client interface and offers or is pursuing integrations with major portfolio accounting platforms like Black Diamond Capital Management, Envestnet | Tamarac, Morningstar Office and Orion.

It’s the integrations, not new technology, that will open the world of cryptocurrencies to financial advisors, said Cory Klippsten, co-founder of Swan Bitcoin, which allows do-it-yourself investors to buy bitcoin through automatic deductions or in one step and which is planning to roll out a service for financial advisors this fall.

“It’s been hard for advisors to set themselves up to work with cryptocurrencies, but the ability has been there,” Klippsten said.

“What they need is technology that integrates with the Black Diamonds, Addepars and Envestnets of the world, the different tools and reporting systems that the advisor industry already trusts and relies on. That will make bitcoin and other crypto look very similar to the other products they are already used to dealing with. It’s the key to opening up that market.”

It’s important for both advisors and clients to have technology platforms that look and behave like the technology they are already accustomed to, Klippsten said, and that allows advisors and financial firms to charge fees for providing advice on cryptocurrency.

What About ETFs?

Much has been said about the prospect for a spot bitcoin exchange-traded fund in the U.S., with many advisors holding out hope that one will provide easy access to the cryptocurrency asset class without the need for new technology or custodial relationships.

Klippsten urged advisors not to confuse a spot bitcoin ETF with the recently launched bitcoin futures products.

“Futures ETFs don’t solve advisors’ problems; that’s for institutions to trade,” he said. “Every time the futures contract rolls over, you’re going to lose 5%-10%. You’ll end up with half as much in bitcoin as someone who buys the same amount of a spot ETF.”

Eyre pointed out that spot ETFs, like many of the already launched private products and trusts, are blunt instruments that give exposure to only one kind of token, or a fixed index of tokens, but cryptocurrency markets move very fast.

SMA services like Blockchange offer a digital platform on which advisors and asset managers can build, manage and allocate to their own strategies or third-party models.

“It has taken too much time to get here, but I think we are now arriving at a point where the tools are finally there, they’re operational, they’re being used, and they’re creating value for clients,” Eyre said. “The days are numbered where advisors or managers can say we don’t have a plan or a strategy for digital assets.”


Updated: 11-5-2021

Getting Ahead In Crypto Education, With Amber McLeod

“If you’re just now getting started, you’re behind.”

“On Purpose” host Tyrone Ross is joined by Amber McLeod, director of customer success at Onramp Invest for a conversation on adviser education in all things crypto.

Whether an adviser is starting at ground zero, ready to trade or a full-blown crypto believer, there is always more to learn and a bevy of educational resources to draw from.

In the crypto investment class, clients also bring varying levels of understanding, from those who are wary of the volatility to those who are ready to jump in but aren’t sure where to start. Sometimes, advisers can even be behind their advisers when it comes to understanding the complexities of crypto.

To create the best possible relationship between advisers and their clients, an in-depth understanding of crypto is required, as well as an innovative and inquisitive mindset, ready to think outside the traditional RIA box.


Tyrone Ross

All right, welcome to the latest episode of the “On Purpose” podcast. I am your host, Tyrone Ross, CEO and co-founder of Onramp Invest. Incredibly special episode today, lots of pivots and moving along behind the scenes, but I brought along a special guest with me, the Director of Customer Success at Onramp, Amber McLeod.

How are you, queen?

Amber McLeod

I’m doing well, happy to be here.

Tyrone Ross

Happy to be here in short notice, thank you. Thank you for grabbing the microphone and getting ready to chat. So, lots of ways to take this conversation, definitely want to talk about, first, you tell the folks who you are, and then we can get into the dumpster fire that has been helping build Onramp every day and how you smooth things out. And ultimately, again, what you’re hearing on the front lines from advisers who were walking into a new asset class as you’re learning it yourself. So, I think you have a very unique perspective that I want to get to. So first, I will just give you the floor. So you can tell everyone who you are, and what makes you so special.

Amber McLeod

So again, Amber McLeod, I have had quite the history in the front lines, working in operations, supporting customer success and customer service. I have a particular interest and passion for creating processes and environments where we can help people succeed in whatever it is they want to see for their business. I guess that’s kind of a synopsis of where I came into Onramp, and what I wanted to do for the team and help with this mission that we have.

Tyrone Ross

Awesome. So starting there, you’ve moved around a bit since you’ve come into the company, and starting in being a project manager, right, and helping us just figure out what we’re doing at any second of the day. I think that has been helpful, because you probably know more of the business than I do, to be honest. So talk about that, like first coming in, developing those processes, and then ultimately, moving to where you are now, which is literally being on the front lines and talking to advisors as they engage with us for the first time. What has that journey been like over the last what, how many months now? Eight, nine months?

Amber McLeod

Eight months.

Tyrone Ross

Eight months, wow.

Amber McLeod

I’m like a vet. So, I think my journey has been very unique, but just so vital to what I’m doing right now. Starting with working with the development team, the engineers, the product, understanding where the vision was, for the product, the nuances of what we needed to do, why we were collecting the specific information that we had to, was just so, so vital for me to understand this space, to understand the business and what we were trying to accomplish. And one of the things that I think also is very unique in my experience, and going from kind of like the backend and building to front end and supporting advisors is we talk a lot about the challenges and what exists in the traditional space now, and where we want it to go. So, having the ability to sit in and gain that knowledge was vital to what I’m doing now. And honestly, gave me a really good baseline or foundation in supporting the advisors.

Tyrone Ross

But let’s stay right there. So what was the hardest thing, right? Because obviously, your knowledge of crypto was just me talking about bitcoin all the damn time. But so there was a steep learning curve, right? And, you know, the learning curve of crypto, learning curve of being an early-stage startup, which is incredible, nothing prepares you for that, right? That’s just the truth, not even having children, probably the closest thing. But talk about that, what were some of the things that were extremely difficult? And then other things that you kind of fell right into, which again, I guess the love of process was easy, because we really didn’t have too many.

Amber McLeod

It was a combination of a few things. So I very quickly had to, thanks to Eric Ervin, he dumped on my front step a whole slew of material for me to get caught up within the space and understanding product, and what kind of product we were trying to build. So while we were in the process of trying to build and trying to, you know, cultivate these processes, I was also trying to learn this space at the same time. There were a lot of things going on at once. And I think one of the parts that was easiest to kind of pick up on and understand was like the vision ultimately, that you and Eric had for, for what the space needs to be. That was probably the easiest part to interpret. When I saw what you guys were trying to build and I understood the story, it was very easy to fall in alignment with what we needed to do. Probably the most challenging part of it all is like the mindset, right? We talk about being innovative, we talk about trying to find new ways, or new processes to make the experience better for the client and the advisor. But it’s so easy to fall back into what you know, or what you’re most comfortable with. So challenging yourself to think outside of the box, challenging yourself to look at an issue and trying to find a solution that is both beneficial to the client in the advisor, and something that we can build is probably the constant challenge. We got all these great ideas, but ultimately, when it comes to building it, the infrastructure is not always easy in practice. So I think that’s been the most challenging piece.

Tyrone Ross

Yep. And I think that is also one of the things that I say to folks is, just you to hear me apologize all the time, is that it’s so complicated what we’re doing in terms of having to know the RIA space, which you can get a PhD on, understanding RIAs alone, having to understand crypto, bring in the right mindset, you know, we’re essentially early, so we’re building the future. So, you have to be a really good storyteller and get people to understand that. So, I think for the purposes of this conversation, right, it’s advisors who listen to this, there are advisors who are probably skeptics, there are advisors who are way down the rabbit hole, like myself, and I think folks just want to know, right? And I always say, I’m a bad proxy, because I’ve been doing it forever. It’s hard for me to relate now to the advisor still trying to figure out the difference between Bitcoin and Ethereum. I understand, I relate, I’ve been there. But, being so far away, it’s really good to get people who are on the frontlines and talking to them. So, let’s spend a little bit of time there. What are you hearing and or seeing, right, in conversations with advisors who you talk to every day, in terms of what their concerns are, what they’re excited about? Because I think that’s what people really want to know, what questions are advisors asking, what are their concerns? And I don’t think there’s anybody better to answer that than you.

Amber McLeod

We have a running list of items that we constantly talk about with advisors and questions that they’re asking. So I guess, to start with questions that come up quite often, is implementation. Honestly, that’s really where it starts, like practice management, understanding how they’re supposed to be carrying these conversations out with their clients, understanding what this model looks like, as you know, a service that they’re offering, where do I start? We can go into the, you know, the 50 questions of what that means. But, that’s ultimately where we wind up with advisors is alright, I’m starting to understand the space, I see that you guys have the Academy for me. And that’s a great place to start. But as far as implementing this into my practice, what do I do next?

Tyrone Ross

And implementing into practice the other thing where, you know, shout Lacey, who just spoke to on the previous episode is billing, right? Billing being, you know, a big one, everything changes, right, your business model may have to change and everything else, as far as the Academy goes, right? And we’ve seen a lot of demand for the Academy, we’ve seen a lot of people just reach out, and hey, where do I get started? Is that what you see most? It’s the Academy, and then I’ll get to everything later? Also, I’m getting asked a lot, what are the size of the RIAs, or is it smaller RIAs, or is it… And I know for you, you’re learning that $5 billion is small. So, so talk, talk a little bit about that, about that segmentation of folks, you know, the behemoth advisors, what they’re looking for versus that nimble advisor, that could be $100 million or so.

Amber McLeod

I think that that one is actually pretty unique. What we discussed in the early days, what we expected versus what actually happened in reality, with our larger RIAs, we see that education is where they want to start. That’s where they feel most comfortable. They know that they have clients that have held away, they may have begun having conversations with them, but don’t really have a game plan on how they plan to implement outside of giving some preliminary advice to their clients. So the larger RIAs are still in that, “let’s learn a little bit more.” And then, what we’re seeing with the smaller RIAs, or the independents, is they’re ready to go. They are ready to trade. They’re serving a demographic that is right in the middle of where crypto is, that 20 to 40 year-old customer base, and they’re ready to trade. They have been a lot more eager and excited to jump on the platform, link held away accounts. They want to have access to more coins because they’ve been in these conversations with their clients for a little bit of time now.

Tyrone Ross

Alright, so we’re gonna do it now. We’re gonna have some real talk and I said the finance advisors listen, and I’m a financial advisor through and through, and I love my peers. But let’s just be honest, talk about some of the things that you get from advisors that are kind of a pain in the butt. Just so they know, again, it’s funny because we pick it each other, but what are some of the things that again, from having conversations or whatever, and, you know, advisors are a little pecuniary, they don’t really like to spend money, and very much process-oriented as well. But what are some of the interesting quirks, let’s call them that, that you hear from advisors when you talk to them? Not only in terms of crypto, but just, I’m sure you understand how guarded they are of their practice and their client.

Amber McLeod

Absolutely. I think that one of the things that I’ve learned in my journey with learning about crypto and all of the brilliant minds that I have around me, you cannot be so apprehensive about crypto, that you’re not even willing to learn and understand the asset class. That’s number one, I think that there is a lot of myth busting. That we are trying to do, and making sure that advisors understand. Regardless of how you feel about crypto, you have to, have to, have to, to be a good fiduciary, be comfortable about talking about it. And we have some advisors who, quite frankly, they get on calls with us. And I think they almost want to convince us why crypto is so scary. So that part is a little challenging, especially with where the space is going. If you’re just now getting started, you’re behind. Right? This is an asset class where a lot of advisors are behind where their clients are. As education is concerned around the space, I think the other piece that gets a little challenging on the front end is they are almost expecting for us to give them the blueprint, right? Of walking into the space. And while we 100% as a whole, we’re working to educate, right? We want to give them education, we want to make sure there’s access for investors, there’s tools to help them along the way. But to be quite frank, there’s work that the advisor is going to have to do as well. How you plan to implement, what you need to do as far as updating documentation for your firm. Billing, but ultimately, it’s their responsibility. So I think we teeter back and forth there, right? Where advisors are expecting us to almost give them the syllabus and say, “All right, here you go, it’s ready to go,” where there’s going to be some work that they have to do on their end.

Tyrone Ross

Right. So last question here. And then I definitely want you to give your, you know, your contact information. So folks to reach out with questions, obviously. So, last question. Before we get to that, and we kind of wind things down here. Talk to me about what again, fresh perspective, walking into the space, really understanding very little about RIAs, and just enough to hold, you know, a two minute conversation on crypto. For those of us right, myself included, right, that are looking to educate advisors, that are looking to get them to understand and to be empathetic about what advisors are going through, put that hat on, right? What would you encourage all of us who are very much crypto hippies, and way in the future? And just how do you not see this? What would you caution all of us to pay attention to or do better to get folks to understand?

Amber McLeod

Well, I think creating an environment where the advisor feels comfortable saying what they don’t know, or what they don’t understand is, is number one. For myself, that was very important for me and my journey, I had to have conversations with you. And with Eric and with others on our team, where I’m like, “I don’t understand this at all. You got it, you got to explain it to me.” When you start with crypto, there’s just so many nuances and all these little pieces that you have to kind of put together to really understand the space and when you do that, it almost becomes less scary, if you will, to go down that rabbit hole of understanding the space. So, like you always say, it’s your especially infamous line spacing grace, right. We have to offer spacing grace to these advisors, and create an environment where they feel comfortable saying that they don’t know. The other piece is just being in tune with the conversations that you have with advisors. Some people suffer from imposter syndrome, right? They’d much rather pretend they know instead of saying they don’t know, and there’s no need to call someone out if you are if you understand where they are, but just start where they are, right? And then the other piece is always being willing to share whatever material you have that assisted you in your journey. Being generous with your knowledge, being generous with the resources that you have, I think is a huge help, what I think is most beneficial to the advisor, and ultimately them being a fiduciary for their client.

Tyrone Ross

Awesome. All right, so before I let you go, cuz I know you got your little meeting coming up, where can folks reach out to you if they’re listening to this and they have questions about Onramp, or you, or just customer success, where can they reach you in the most efficient manner?

Amber McLeod

So for any of us who’s interested in learning more about Onramp and the services that we offer, or just having a conversation about what the platform can do for their for their business, or they can reach us at, and if there are any specific questions for myself, feel free to email me at


Updated: 11-10-2021

What a Decade in Crypto Teaches You (Podcast)


Updated: 11-16-2021

The Future of Wealth Management Is Non-Custodial (Pocast)

Updated: 11-18-2021

How DAOs Can Empower Advisors and Investors

Decentralization doesn’t mean advisors and other financial intermediaries will be obsolete. In many cases, decentralized autonomous organizations, or DAOs, will give advisors and investors greater decision-making abilities.

Disintermediation and decentralization can sometimes be intimidating concepts for those of us accustomed to the traditional financial system and industry.

For those of us who have learned to navigate the labyrinthine incumbent and entrenched system of banks, brokers, custodians, exchanges and asset managers, our knowledge of traditional finance has often been quite lucrative. Disintermediation and decentralization mean having to learn something new.

But if we peel back the layers of these concepts, we’re likely to find tremendous opportunities for engagement, creating social good and potentially generating returns and income.

What Is A DAO, Exactly?

That brings us to the concept of a DAO, or a decentralized autonomous organization, a blockchain-based community whose rules and practices are contained in computer code rather than in printed bylaws.

Unlike decentralized finance (DeFi) in general, which uses blockchains to replace trusted third parties in banking, lending, investing and other financial transactions, DAOs use technology to transfer some or all decision-making power from organizations to individuals, utilizing code to set guidelines for how decisions are made and enforced.

Most DAOs are built on the Ethereum blockchain and serve varying roles. Some early entrants into the DAO area were solely built to govern a cryptocurrency. Others were created to extend blockchain technology to other areas of finance and investing, such as the Index Coop DAO, which creates decentralized index products in the cryptocurrency sector.

DAOs And Advisors

I recently discussed one such DAO with PlannerDAO founder Steve Larsen, the founder of PlannerDAO, a source of digital assets information and infrastructure for financial advisors, and who helped launch the Certified Digital Assets Advisor (CDAA) designation.

Unlike most advisor designations, such as CFP (Certified Financial Planner), CPWA (Certified Private Wealth Advisors) and CFA (Chartered Financial Analyst), which have centralized governing bodies deciding on qualifications and other rules regarding the use of their marks, the CDAA is governed by a DAO made up of its membership.

Advisors who earn their CDAA marks are given a digital token that allows them to participate in the designation’s governance.

“We want the DAO community to decide which areas of cryptocurrencies and the technology are relevant to advisors, and then we want to open it up to other providers to come in and provide education to our professionals,” said Larsen. “So someone like the FPA [Financial Planning Association] could come in as an education provider, but our community of planners would decide on the topics and requirements. The community members and holders of our certification determine what’s relevant.”

For participating in the decentralized governance of the CDAA, advisors will receive another token that is intended to increase in value over time, said Larsen, so “advisors get compensated for the work they’re doing as members of our community – they don’t have to develop a product or service, they’re compensated by the economic structure we’re putting in place to deliver solutions.”

The CDAA’s DAO will provide its membership with tools, checklists and templates to ease the process of working with clients’ digital assets and provide advisors with a safe place to ask questions and have discussions on cryptocurrencies without having to rely on the not-always-objective expertise of asset managers, vendors or custodians.

While such industry participants express zeal for educating advisors, they also have conflicts of interest, as they are trying to earn advisors’ business and accumulate assets.

Other DAOs For Investors Emerge

Popcorn, a soon-to-launch DeFi platform with a socially responsible twist, has also gravitated towards the DAO structure for part of its governance. But while the CDAA is distinctly directed at advisors, Popcorn is aimed at all investors.

Simply put, Popcorn is a yield aggregator that allows some of its returns – up to half of them, in fact – to be directed towards charitable organizations.

Investors deploy their digital assets to Popcorn’s liquidity pools via smart contracts – contracts whose terms are governed by code, with no need for an intermediary ensuring that all parties meet their obligations.

In return for their investment, investors receive a token that allows them to participate in the centralized governance of the pool, including the ability to vote to choose which beneficiaries receive the portion of the return that becomes a donation and set parameters for the smart contracts.

“The great thing is that you can just come to Popcorn if you want to use our products to generate yield. You’re not required to participate in the governance,” said Popcorn co-founder Michael Kisselgof. “If you have earned a Popcorn token, you’re incentivized to contribute because we are baking incentives into our model.”

Through Popcorn, advisors’ clients can not only create social good, but they can generate attractive income in an era of low interest rates and shrinking dividends. The company’s first product, Butter, is a stablecoin strategy capable of generating up to 15% in annual yield.

Another DAO, Augur, has been used to power sports betting markets and options. Augur allows any user to make predictions, whether it be on elections, sporting events or the value of a stock on a specific date through its platform.


Decentralization doesn’t mean that advisors and other financial intermediaries will be obsolete. In many cases, DAOs will empower advisors and investors with greater decision-making abilities.

So if DAOs catch on and are applied throughout the wealth management space, there will be less of a need to rely on influential industry organizations and custodians for guidance and governance.

Instead, advisors and investors will be empowered to do these things themselves across user-friendly platforms, and will often be compensated and incentivized for their participation in them.


Updated: 11-24-2021

Bitcoin, The Evolving Organism (Podcast)

Updated: 11-30-2021

Here’s The Latest Way Advisors Are Shielding Clients From Fraud

It’s a common refrain: An individual, often someone elderly, doesn’t review her account regularly and, suddenly, she’s a victim of fraud.

That’s what happened to a 91-year-old client of Gary Schatsky, president of IFC Personal Money Managers in New York. The client lost more than $2,400 after a fraudster added a new payee name and dollar amount to a previously used check and withdrew unauthorized funds from her account.

It had happened to the client before, and the bank had covered the roughly $7,000 theft. In the recent instance, however, the bank refused to eat the cost, saying the incident was reported after the allowable window had passed.

Many people don’t pay enough attention to transactional accounts, such as checking, savings and credit card accounts, leaving them vulnerable to fraud or simple mistakes that can be costly. That’s one reason why some financial advisors are going on the offensive.

They’re offering third-party services to clients, at no cost or at discounted rates, to help identify when something unusual is happening. These services send alerts to clients, trusted individuals, and sometimes advisors themselves, about anomalies such as unusually large transactions or unauthorized credit card use.

Although the alerts can benefit people of any age, they can be especially useful for older clients, who may need extra help from loved ones to manage their finances and avoid financial predators.

Four in 10 caregivers report the person they care for has already been a victim of financial fraud, according to the Allianz Life 2021 Retirement Risk Readiness Study.

What’s more, both elder financial abuse victims and caregivers report about $60,000 in average losses, according to the study. Receiving proactive notification of a suspected issue could help identify problems before they become a major headache and financial loss, advisors say.

One of these platforms is EverSafe. Clients can sign up directly, but EverSafe also partners with wealth managers such as Raymond James and Fidelity.

Advisors can then get a holistic view of all their client’s alerts on a single dashboard, says Howard Tischler, co-founder and CEO. The ability to do this depends on what an advisory firm allows and its clients’ preferences, he says.

The system looks for anomalies such as unusual withdrawals, missing deposits, irregular investment activity, changes in spending patterns, and late bill payments.

The platform’s “trusted advocate” feature enables users to designate family members, professionals, or other trusted individuals to receive alerts and assist in monitoring, which can be especially helpful for older clients.

“Even meticulous investors may not be able to monitor their accounts as regularly as they age,” says Sandra Adams, a certified financial planner with the Center for Financial Planning in Southfield, Mich. “That’s when we become vulnerable.” Adams’ firm offers the service at a discount to clients.

She’s also been using EverSafe for her own accounts for a few years and was able to quickly catch the unauthorized use of her credit card. “It’s spot on,” Adams says. “When things happen, I know about it immediately.”

Another option that performs similar functions is Carefull. There’s a consumer-oriented version that some advisors pay for and offer to clients for free.

The service sends alerts about unusual account activity to what it calls “trusted Circle” members designated by users, but these members don’t have access to users’ actual accounts. Carefull also doesn’t hold credentials for bank accounts or credit cards.

Carefull has also recently rolled out a Pro version for advisors, which includes an analytics dashboard, customized invitation flow for clients, and other features, says Todd Rovak, the company’s co-founder.

This allows them to see alert activity for clients who have signed up for the service and gives them the opportunity to follow up.

Today the service is focused on transactional accounts—namely credit card, checking, and savings—which is where fraud, mistakes and misuse occur most regularly, he says.

The company has the ability to include brokerage and advisory accounts, but advisors have said they are more interested in tracking the accounts and behaviors they can’t see, Rovak says.

John Cooper, a certified financial planner with Greenwood Capital in Greenwood, S.C., says he’s been testing the platform with his son, who recently graduated college. It’s helpful to have a second set of eyes to make sure nothing is amiss, he says, adding that his firm is actively considering using the platform for clients.

eMoney Advisor, which makes popular financial planning software, allows clients to link their bank and credit card accounts and set up multiple types of alerts to inform them about a low cash balance, large expense, large deposit, or when their budget is exceeded, among other things.

Catherine Valega, a wealth consultant with Green Bee Advisory in Winchester, Mass., who uses the eMoney platform, encourages clients to set up these alerts, especially the one for large expenses.

They determine what constitutes a large transaction, and if one occurs that they didn’t authorize, they’ll know about it quickly and be able to take prompt action, she says.

“Using digital tools gives us more time to address a situation should one arise,” Valega says.

eMoney also offers the option for advisors to view client’ alerts on a dashboard. “In addition to notifying advisors of their clients’ account activity, these alerts help the advisor deliver dynamic financial planning and adjust financial plans as components of a client’s financial picture may change,” a company spokesperson says.

Not all advisors are comfortable receiving alerts on behalf of clients, and some firms don’t allow the practice. Financial professionals should check with their firms’ compliance departments before opting to receive alerts to ensure they are following protocol.

The SEC does not have any rules preventing an investment advisor from being the point of contact for third-party identity theft/credit monitoring service alerts, according to a spokesperson.

For its part, Finra would consider the facts and circumstances of the situation, according to a spokesperson.

For example, if the financial professional would have an obligation or ability to act on the customer’s behalf with the third-party service, it could be a “position of trust” subject to the requirements of Finra Rule 3241, the spokesperson says.

The rule limits any Finra-registered person from being named a beneficiary, executor, or trustee, or having a power of attorney or similar position of trust for or on behalf of a customer.

Even firms that don’t use these alert-based services say they are mindful of issues that can crop up, especially with older clients who may be more prone to financial slip-ups and abuse.

“This area is one of intense research and study by all financial firms as well as fintech innovators to find that solution that protects clients without an onslaught of false positives that impinge upon the dignity, autonomy, and privacy of clients, particularly older ones who may already feel threatened by some of the efforts to consider them ‘vulnerable’ merely because they cross an aging threshold,” says Ron Long, head of Wells Fargo Aging Client Services.

He adds that the firm has started piloting an Aging Client Innovation Forum where it schedules fintech firms to pitch their solutions.

Other firms say they are actively educating advisors about the risks of financial abuse and the signs to watch out for. JPMorgan Chase , for example, has a firm-wide Elder Vulnerable Person program, which includes standards that its advisors are required to follow.

Updated: 12-2-2021

An Advisor’s Guide To Popular Crypto Wallets

There will come a time when your clients will ask you about crypto investing. Be prepared to talk to them about crypto wallets.

The volatile nature of cryptocurrency makes it one of the most intriguing speculative investments today. The trademark scarcity of bitcoin, in particular, has given it the reputation of “digital gold.”

Just like with any physical item of value, crypto investors should practice good digital security habits similar to putting large sums of cash in a safe or a savings account insured by the Federal Deposit Insurance Corp. (FDIC).

When storing crypto, investors may keep smaller sums hosted directly on whatever exchange (i.e., a digital trading platform) they use.

They can also choose to move their crypto off platform and into a crypto wallet. The wallet may be software connected to the internet (aka a “hot wallet”) or be an offline hardware device (aka “cold storage”).

“A lot of people bought cryptocurrency for the first time this year,” said Brittney Castro, a Los Angeles-based certified financial planner and founder of the media company Financially Wise. Millions of new investors are therefore learning about wallets.

What To Do Starting Out

Step one for any crypto newcomer, according to Castro, is learning how both exchanges and wallets even work. One of the most popular exchanges for beginners, Coinbase, has been around since 2012 and went public on the Nasdaq in 2021.

Coinbase allows users to buy/sell over 100 unique cryptos, which is a good starting point for most.

Step two is deciding how to store your crypto coins long-term. Advisors and financial planners should plan on helping clients decide what their personal approach or philosophy is, said Castro.

If your clients plan to hold a large amount of crypto, for instance, they should research cold storage options. Cold storage is effectively a piece of hardware (sort of like a crypto USB drive) that functions as a digital safe.

However, if your clients just plan to spend a few hundred dollars buying and selling crypto, it’s probably OK for them to keep their coins on a trusted exchange, such as Gemini, that uses its own mix of hot and cold storage.

And finally, for those in-between sums that your clients still want to protect but also retain easy access to – say $500 to a few thousand dollars, depending on your client’s risk tolerance – a hot wallet is the most convenient choice.

Each option has its own list of features and security protocols. Some even have a private version of insurance that works similar to FDIC insurance for traditional bank accounts.

Here’s A List Of Some Popular Crypto Wallets For Beginners:

This isn’t a comprehensive list, but rather a place to start. Crypto is an emerging technology, so encourage your clients to research thoroughly and keep safety top of mind:

Free Crypto Wallet For Beginners: Exodus

Exodus is a free crypto wallet that lets users access and store over 100 types of cryptocurrencies. (Trading fees do apply, like always.) The wallet lacks some bells and whistles that advanced investors might find imperative, but it comes with a simple user interface and built-in exchange, similar to Coinbase.

For clients looking for consistent customer service, Exodus also has them covered with 24/7 human support. However, the tech for this wallet is closed-source, which for some sort of goes against the decentralized ethos of crypto, and not everyone may like relying on the Exodus team for the security of their crypto.

Most Popular Crypto Wallet: Coinbase

Coinbase is definitely a place to start,” said Alexis Johnson, president of the blockchain public relations and events company Light Node Media. “It’s a wallet and an exchange as well.”

However, Coinbase has a limited supply of altcoins (non-bitcoin cryptos). Users will likely be able to buy/sell the most popular altcoins listed on the CoinDesk 20, which range in market cap and utility.

Coinbase itself lists over 100 cryptocurrencies, yet there are thousands of altcoins investors can choose to buy and sell – and the number goes up every day.

Some altcoins are considered currency, whereas others, like ethereum, have more advanced functionality like smart contracts.

Meanwhile, coins like Cardano’s ADA are thought of more like buying stocks in a promising new blockchain. And stablecoins like tether are cryptocurrencies tied to a fiat currency (in tether’s case, the U.S. dollar).

Choosing altcoins all goes back to my earlier point about knowing your clients’ crypto philosophy. Once your clients become more seasoned, they’ll likely have an idea as to which altcoins they want to buy, and why.

Then, it may be time to branch out from their Coinbase wallet, said Johnson. In that case, have them research a more robust option.

Popular wallet For Altcoins, Defi And Dapps: MetaMask

MetaMask’s wallets make popular hot wallet options for the Ethereum blockchain.

“For altcoins that are not listed on Coinbase, your best bet is MetaMask,” Johnson told CoinDesk.

Operating as an extension on popular internet browsers like Firefox and Chrome, MetaMask wallets don’t simply store digital coins.

The functionality of MetaMask is nearly unparalleled, according to many crypto enthusiasts. MetaMask wallets allow users to interact with smart contracts and decentralized applications (dapps) – two popular functions of the Ethereum blockchain which have utility in decentralized finance (DeFi).

A word of caution: MetaMask users were recently targeted in a phishing scam that prompted people to click phony advertisements that asked them for information on their wallet keys. Advise your clients to never give their key out to anyone and always go directly to the verified URLs to enter their information anywhere online.

Most Popular Cold Wallet: Ledger

Ledger has two options for cold storage: the Nano X ($119) and the Nano S ($59).

The Ledger Nano X connects to devices with Bluetooth or USB through the Ledger desktop or mobile app. Meanwhile, the Nano S lacks Bluetooth capability, but both still support over 1,800 cryptocurrencies.

Bottom Line

When exploring the best crypto wallets for your clients, don’t overwhelm them too much at first. Encourage them to try a few low-cost or free options with good security measures.

Remember that the crypto community prefers open-source technology over closed-source, since coders can weigh in on potential security vulnerabilities that way.

Your clients will likely start with an exchange such as Coinbase or Gemini, then move on to hot wallets when they buy more crypto than just a few hundred dollars’ worth. And when they’re ready to invest higher sums, steer them towards a cold storage solution with a slightly higher price tag and more robust security features.


Updated: 12-3-2021

Ritholtz, WisdomTree Launch Crypto Index For Investment Advisors

The index goes beyond bitcoin and ether, with exposure to DeFi and metaverse tokens.

Ritholtz Wealth Management and WisdomTree Investments are launching the RWM WisdomTree Crypto Index to give retail investors easier access to crypto investments via financial advisors, the companies announced Friday.

The Index holds 36% bitcoin, 20% ether and 4% each of 11 “other cryptoassets that provide exposure to the broader crypto ecosystem,” according to a statement.

“This is really trying to capture above and beyond just the ‘King Kong’ and ‘Godzilla’ of the cryptocurrency market,” Michael Batnick, Ritholtz’s director of research, told CoinDesk in an interview, referring to the index’s exposure to decentralized finance (DeFi) and metaverse tokens, not just bitcoin and ether.

Batnick said that Ritholtz Wealth won’t be charging clients an investment management fee to hold the index.

Integration platform Onramp Invest will provide advisors with separately managed account (SMA) infrastructure, while the Winklevoss-led Gemini exchange will serve as the trading platform and custodian.

Ritholtz’s chief investment officer, Barry Ritholtz, told CoinDesk that clients have become increasingly intrigued by bitcoin and other cryptocurrencies.

Beyond ETFs and mutual funds, he said that “this is going to be the next best thing for RIA [registered investment advisor] clients and RIAs who want to get exposure to the space.”

Ritholtz’s leadership, including Ritholtz, Batnick, Josh Brown and Ben Carlson, have invested in the index, along with financial advisors and employees at the firm.

Ritholtz has about $1.8 billion in assets under management, according to its website. WisdomTree currently has about $76.4 billion in assets under management globally, according to the statement.


Updated: 12-15-2021

RIA of the Future (Pocast)

Updated: 12-22-2021

A Crypto Future Is Coming For Investment Advisers (Podcast)


Updated: 12-30-2021

One Big Regulatory Question Holds Advisors Back From Crypto

Are cryptocurrencies securities?

The biggest regulatory question for advisors concerning digital assets today is: Are they securities or not?

Digital assets are still quite new, having only really burst into the mainstream over the past two to four years, while the central rules governing most financial advisors date back to World War II-era legislation like the Investment Advisers Act and the Securities Exchange Act.

So today’s regulators, such as the U.S. Securities and Exchange Commission (SEC), have quite the job fitting the square peg of cryptocurrencies into the round hole of eight-decade-old laws.

I recently introduced readers of my newsletter columns to two different digital asset companies pushing into the registered investment advisor (RIA) market: Swan Bitcoin and HeightZero.

Both of these companies have decided to narrow their focus to one or two types of cryptocurrencies, in part because they fear the regulatory scrutiny that may come when this big regulatory question is answered.

In Swan’s case, the company is focused solely on bitcoin.

“Many or most crypto assets have significant regulatory risk, particularly as it relates to being securities under U.S. law, but we think these problems are now solved for bitcoin,” said Andy Edstrom, the head of institutional investment at Swan Bitcoin. “We don’t think this question has been answered for most other digital assets, and they potentially pose problems for intermediaries like financial advisors.”

HeightZero, meanwhile, has decided to focus on both bitcoin and ether, but no other alternative coins (altcoins).

“As of right now, we want to be sure we’re listening to the SEC and making sure we’re doing everything we can to be compliant and keep our clients compliant,” said HeightZero founder A.J. Nary. “We don’t want to be in a position like Coinbase was when Ripple was declared a security, the SEC sued [Ripple], and [Coinbase] had to take the token off of its platform. If that happened to us, we would have to notify all our advisor clients that they were using a security. We want to protect our clients.”

Swan believes that ether is a security, however.

“The reality is that Ethereum isn’t really decentralized; the ownership is highly concentrated,” said Edstrom of the blockchain.”The proof-of-stake model they are moving to is inherently centralizing, because when you stake coins you end up getting more coins; thus, if you have more money, you make more money. So bitcoin is the only one we feel comfortable with.”

The Great Debate

At the heart of the debate are the SEC’s custody rules. If digital assets like cryptocurrencies are securities, then regulations require that they be held not by an advisor, but by qualified custodians.

These rules are the reason financial advisors do not hold their clients’ assets but turn to companies like E*Trade, Schwab, BNY Mellon | Pershing and Fidelity to provide custody services.

Advisors and end-investors, for the most part, no longer hold stock certificates or paper bonds but a digital record of ownership for those investments, while the actual assets are held by a custodian on a centralized ledger within a central securities depository – and only qualified custodians are permitted to own the assets within this depository.

But digital assets, at heart, were invented to circumvent this system via a decentralized ledger and be “self-custodied.” By holding the cryptographic keys that enable me to access my cryptocurrency holdings, I am responsible for the safekeeping of those assets. They are also digital bearer assets – the person holding the keys is considered to be the owner of the assets.

What Is A Security, Exactly?

The SEC defines a security as “the investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others.”

Under this definition, bitcoin does not meet the criteria for being called a security because there is no readily identifiable, centralized third-party enterprise.

Earlier this year, at the Aspen Security Forum, SEC Chair Gary Gensler made it clear that many tokens should be considered securities.

Why Not Both?

For the time being, the answer to our big regulatory question appears to be “both.” Some cryptocurrencies are not securities while others are, at least for the time being.

The SEC seems comfortable with thinking of bitcoin itself as a commodity, not a security (a commodity being defined as either a tangible item or an item made to be bought and sold in commerce that is rightfully regulated by the Commodity Futures Trading Commission [CFTC] and not the SEC itself).

And industry players like Height Zero feel pretty sure that the same can be said of ether – like bitcoin, it is a commodity.

But until greater regulatory clarity comes from the SEC and other federal policymakers, other altcoins should still be treated as if they were securities.

What If Cryptos Are Securities?

In November 2020, the SEC solicited some guidelines from the financial industry to help determine whether advisors are working with a qualified digital asset custodian. A Dec. 6, 2020, response from the Open Economy Initiative noted that qualifications for digital assets should be based mainly on cybersecurity.

A qualified digital custodian provides an offering ensuring secure key management and interoperability with different networks.

So as advisors begin to have more choice over where to custody clients’ digital assets, they should examine whether potential custody providers offer highly secure online custody services (hot wallets), offline services (cold storage) and potentially “deep cold” storage dividing custody recovery between different physical locations, which drastically reduces the chances of losing access to clients’ assets.

“Anyone who says they know what the SEC is going to do long term doesn’t really know what they are talking about,” said Nary. “I think it’s a good idea to take a very conservative approach to this space, especially if you are an SEC-registered advisor.”


Updated: 1-6-2022

Lessons I’ve Learned About Crypto As An Advisor

Lessons from my personal journey into crypto, and how you can apply them to your own practice.

In my previous articles for this newsletter, I’ve highlighted many of the conversations you will have to have with clients and prospects as you add crypto and digital assets to your practice.

This article is going to be a little more personal. I’ll be taking you down some of the roads I’ve traveled in my crypto journey, so that you can learn from some of my mistakes and successes and impart that knowledge and experience to your practice.

Where I’ve been

Let’s start with my personal journey into crypto. It all began in the fall of 2017, when my partner talked me into buying some crypto for the first time. I opened a Coinbase account, with all the frustrations that come with the know-your-customer (KYC)/anti-money-laundering (AML) process.

I was then shocked to learn there was more than just bitcoin. In my naivete, I first purchased ether, with the rationale that bitcoin had already run to over $5,000, so surely this other cryptocurrency I knew nothing about would see the same growth.

Since crypto is a 24/7/365 market, I checked my Coinbase account approximately every 15 seconds. I’d wake up in the middle of the night and check. First thing in the morning, I’d check prices. Waiting at a red light, time to check prices. I had no idea what I invested in, or why the price was moving, but I liked that it was easy.

My next step was trading crypto on a few exchanges. In this scenario, I had to again go through KYC, but these exchanges weren’t based in the U.S. I was trading any number of cryptocurrencies, most of which I knew nothing about, against bitcoin, with the goal to accumulate more bitcoin.

Since I knew very little about all these cryptocurrencies, or about trading any sort of asset, I started joining Telegram groups – now commonly referred to as “pump-and-dump groups.”

I actually wasn’t aware that I was part of something that nefarious. I would read the updates, again, at all times of day and night, and try to make the appropriate trades.

I was usually either late to the trade, and ended up buying near the top, or was too greedy to get out at the appropriate time, giving back all of my gains. Through this process, I did learn trading techniques like support and resistance, relative strength index (RSI), stop loss, take profit.

Seeing all those cryptocurrencies I was trading was the impetus to send me down the proverbial rabbit hole, learning all I could about Bitcoin, blockchain technology, custody, and many of the developments we would later refer to as decentralized finance (DeFi) and Web 3. This is when I really got hooked on this technology.

While my partner and I tried to determine how we could make money consulting, we found that I was better at educating people about crypto, blockchain and digital assets, and we started our YouTube channel in mid-2019.

We focused on helping people more easily understand the technology and the new systems that were being built, with a bent on how crypto, DeFi, and blockchain would affect finances, businesses and lives.

Since that time, I have tried several different wallets, investing in at least 100 different tokens, yield farming and NFTs. Some I have done as a matter of better understanding the process, protocol or opportunity. Some I have researched and really liked the mid- to long-term growth possibilities. And some I have just “aped in” to try to make some quick money.

I have bought too late and sold too early … and then sold too late. I’ve definitely been a victim of a “fear of missing out” (FOMO), and continue to struggle with that. I’ve been scammed, nearly scammed and hacked.

I’ve also had some great successes in terms of gains from investments, and gains from knowledge and understanding, along with the growth of the network I’ve been able to grow and maintain.

From all that experience, good and bad, I’ve broken out a few items to keep in mind when investing in crypto and when advising others.

1. Don’t Look For Quick Bucks.

I tried trading thinking I could make money quickly, exploiting others who weren’t as smart as I am. They’re smarter, and they are waiting for people like me.

Those who are good at trading crypto, or any other asset, have a different skill and a different motive than investors. Most of us are not going to be able to time any market and will get hurt in the process. Best to leave the trading – and the trading sites, social media feeds and YouTube channels – to those who are part of that profit motive.

2. Get Educated.

The best way to invest, and to help others invest in a new technology and infrastructure, is to understand it. Once I better understood how bitcoin works and how a few other cryptocurrencies work, I was able to resist many of the temptations to ape into certain tokens or to sell prematurely because of what seemed like bad news.

3. Have An Investing Plan.

This is the crux of why advisors need to learn about crypto – so that they can help clients develop a plan. Everyone is going to have a different risk tolerance, set of goals and needs and lifestyle.

I had to have some plans in place for the amount of money I would risk on a project I was researching, versus one I really saw a long-term benefit in. I also decided when I would feel like my investment theses had been overturned. This is based on my comfort level with the technology, my own risk appetite and the time I had to devote.

For example, I decided that I would put a few hundred dollars into a new project that had a good team, but hadn’t had the smart contracts audited. I wouldn’t rush to pull my money out if the value went down quickly if I believed in the team. I will sell part when I’ve doubled my money and let the rest ride.

For more established protocols, I’m willing to invest more, but expect a lower return. I also have an idea what should affect the value and know what can cause that value to drop.

4. I’m Not Going To Catch Everything.

When I started learning about crypto, it was all crypto. Then crypto branched into DeFi as well. Then we added non-fungible tokens and now decentralized autonomous organizations (DAOs).

Each new strain has added more multimillionaires, seemingly overnight, and from inauspicious beginnings. The proverbial DoorDash delivery person into an eight-figure crypto venture capitalist within weeks.

I have to be comfortable with the fact that each of these subgroups of crypto is actually an entire investing ecosystem unto itself, with experts, value drivers, scammers and profit motives.

I can’t possibly be an excellent investor in all these areas, and so I shouldn’t try to invest in them all. This is such a hard lesson, watching so many others become instantly set for life.

5. Security And Safety Are Key.

The nature of cryptocurrency, with its self-custody, makes the security of my assets a priority for me. I’ve chosen to keep more of my assets in some digital form – crypto or stablecoins – so that I can earn more.

I have had to really work to create a security and safety plan, along with an estate plan. Since so much of our wealth is tied to crypto, I’ve had to also educate my wife about how to access our assets and how to keep them safe.

This is going to be an incredibly important conversation and a source of value you’re going to be able to offer clients.

6. Conviction Is Also Important.

So many times in the past few years, I wish I had the conviction to stay with certain tokens and investments through a downturn.

I’ve realized that all those people who turn into millionaires seemingly overnight due to a meteoric rise in the value of their crypto assets usually had to suffer through some time when it seemed their investment was worthless.

I did the research and found projects I liked investing in, but too often, I decided to bail when it seemed it wouldn’t take off. Often I was also following my FOMO, and moving those funds to the hot crypto investment. Many times I would lose on both sides.

As part of my investment theses, I’ve marked the few projects I have conviction in, whether they are going up or down. The only way I’ll sell those early is if something materially changes my thesis or the valuation I see of the investment.


I realize that this article sounds like one long cautionary tale, but the point is to really to look at crypto, DeFi and digital asset investments as you would just about any other investment you choose to make. Do your research. Form a plan. Stick to your plan. Trust yourself.

As the advisor, you’ll have to help clients with their education and research. You’ll also have to create and follow plans best suited for both your clients’ crypto and overall portfolios.

An Advisor’s Guide To Altcoin Investing

Just like purchasing individual stocks, investing in altcoins requires research and knowing the crypto market well. Here’s what to look for.

While 2021 was certainly the year of bitcoin, investors with a particular type of risk appetite are diversifying their crypto portfolios with altcoins.

The term “altcoin” is short for “alternative coin” and refers to cryptocurrencies other than bitcoin. Ether is perhaps the most popular altcoin, though crypto insiders quickly bring up other names like the bitcoin copycat litecoin, the stablecoin tether and, of course, dogecoin, the meme coin popularized by Tesla CEO Elon Musk.

In total, there are more than 15,000 cryptocurrencies, according to the crypto market data website CoinMarketCap. Bitcoin makes up about 40% of the market, and ether makes up roughly another 20%. That leaves the remaining market share – some 40% – composed of other altcoins.

Just like purchasing individual stocks, investing in altcoins requires research and knowing the crypto market well. Ahead are some insights from crypto industry insiders that explain what factors to consider when investing in altcoins.

Altcoins And Regulation

One of the first questions that inevitably pops up when discussing altcoins is that of regulation.

In a recent panel at DeFiCon, a blockchain event in Brooklyn, N.Y., American Blockchain Initiative CEO and founder Alex Allaire explained that regulation is a top priority for legislators and governmental agencies alike.

“More awareness comes with more scrutiny,” he said, noting that government officials have begun to prioritize cryptocurrency discussions more now that bitcoin and alts have reached a level of widespread familiarity.

From a national security perspective, there’s real urgency to decide on clear guidelines for stablecoins in particular, Conor Carney, legislative director for Rep. Lee Zeldin (R-NY.), said during the same panel discussion.

Stablecoins are altcoins that are pegged to a form of fiat currency (commonly the U.S. dollar) and work all over the world.

According to Carney, stablecoins could provide a way for the U.S. dollar to retain its global trading power as more countries around the world create digital forms of their national currencies, known as central bank digital currencies (CBDCs).

Yet stablecoin regulation is a hot-button issue that will definitely affect public sentiment. Both Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen have been critical of stablecoins in the past. Last summer, Powell said the U.S. wouldn’t need stablecoins if the country instead opted for a CBDC.

But Carney argued against Powell’s stance: Other countries are developing their own CBDC at a faster rate than the U.S., which could be an issue for both national security and global trade, he said.

“The United States, given the way we finance our budget every year with a deficit, is very reliant upon the U.S. dollar being the global reserve currency,” Carney said. “The only way for that to happen considering there are other nations, including China, who are moving forward with CBDCs at a faster pace, is to make sure that stablecoins and the private issuers that are issuing them in the United States with U.S.-backed assets are the reserve assets for those currencies.”

The U.S. stands to lose a lot of its global influence, Carney said, if it doesn’t invest in the development of stablecoins backed by U.S. dollars or assets that are denominated in U.S. dollars.

Altcoin investors therefore might argue that now is the perfect time to look into buying stablecoins such as tether (USDT) and Circle’s USDC.

Reading Market Sentiment

If sentiment is low around a particular altcoin you’re interested in, that may be a good sign, argues Light Node Media co-founder and CEO, Nelson Merchan Jr.

The principle of “buy low, sell high” applies to altcoins just like it does in the traditional stock market. According to Merchan, when buzz hits social media about a new blockchain project or altcoin, you should do your due diligence while the project has its 15 minutes of fame and wait to buy when the sentiment is down.

“When the market is really hot, you see a lot of buzz and a lot of hype that enables you to come up with a list of the most promising ones,” Merchan says.

Use every newsworthy altcoin headline as a sign to stop to think about the future. Imagine a world in six months or a few years that needs or wants a particular project, altcoin or blockchain solution.

For instance, blockchain privacy and data sovereignty is a burgeoning area of need, Merchan says. Investors could consider buying utility tokens of projects they believe have legs and lasting value.

Or on the gaming side, you can look at which decentralized finance (DeFi) gaming communities might be taking off in the foreseeable future and then buy altcoins for that system.

“When the market corrects, similar to how it did in the last few weeks, a lot of these gaming, crypto protocols dropped 40% to 50%, so that significantly drops the sentiment, and then people slowly stop talking about or most of them,” Merchan says. “So the whole idea is, where is the narrative for gaming? Has it hit a peak? Is it going to? Will it bounce back or recover? Or are we going to see a pretty significant bear run?”

Use Case And Community Strength

Finally, any good crypto project demonstrates its worth by the engagement of its community. After all, the number of buyers and sellers is what drives liquidity in any market, and the same holds true for altcoins and non-fungible tokens (NFTs).

The way to measure community-wide adoption of an altcoin is to evaluate what industry insiders refer to as “use case,” or the ways you can use, apply, redeem and exchange your crypto.

Meme coins are perhaps the most obvious altcoin example of community buy-in. When most meme coins drop, they are worth little or nothing and, ironically, have little to no use case.

But through social media and celebrity influencers, their value may rise and create new uses for them where there were never any before. Dogecoin is a perfect example of that phenomena.

Ryan Fochtman, a strategic partnerships manager at MoneyMade, says he dabbles in altcoins in his off-hours from work.

Using a portion of his personal portfolio devoted to what he considers his play money, Fochtman buys into coins with a healthy understanding that they may not bring a return on investment. But when they do, it’s because of community buy-in, he says.

“There’s this new wave of technology using these alternative coins and crypto in general to buy everyday items,” says Fochtman.

“Now AMC accepts crypto for tickets now. The more use cases that we can get out of these coins is going to be just a better overall fun space and bring them more mainstream.”

And that’s not even counting the metaverse and virtual real estate projects like Decentraland. Utility tokens for Decentraland are surging in value as corporate brands such as Adidas and Nike express interest in buying digital land.

“I really like the whole Decentraland and meta-universe that everyone’s been talking about,” Fochtman says. A big part of Fochtman’s due diligence is trying to think ahead and consider which coins are going to be the most used by people.

“I think the whole crypto space is just evolving and becoming more and more intelligent,” Fochtman says. “I think that these altcoins are just going to be a part of it all.”


Updated: 1-12-2022

A Third Of Americans To Buy Bitcoin By End Of 2022, Says Ric Edelman

The future’s bright for Bitcoin according to Ric Edelman, founder of financial advisory outfit Edelman Financial Engines.

Bitcoin (BTC) bull and Edelman Financial Engines founder Ric Edelman has made some promising predictions about the future of the seminal cryptocurrency.

In an interview on CNBC program ETF Edge on Monday, Edelman said:

“We’re already at a quarter of that number, so we’ve got 24% of Americans owning Bitcoin. It won’t be that much of a stretch for it to get to a third. Bitcoin is becoming more and more mainstream. People are hearing about it everywhere — it isn’t going away.”

While 2022 has gotten off to a rocky start, in his view, governments, corporations, foundations and pension funds are investing in Bitcoin: “There is major institutional involvement.”

As the author of soon-to-be-released The Truth About Crypto, Edelman is a long-standing crypto proponent. In 2019, he described Bitcoin as the first “genuinely new asset class” in 150 years, and back in December 2018, he recommended that investors load up on the orange coin.

In a follow-up interview with CNBC on Tuesday, he lamented that while he has predicted a Bitcoin spot exchange-traded fund (ETF) for the past seven years, he’s convinced that by 2023, there will have been spot ETF approval.

Similar to United States Securities and Exchange Commissioner Hester Peirce’s thoughts on the matter, Edelman articulates that the SEC is running out of excuses to say no:

“A lot of the concerns the SEC has have been resolved by the industry through their own maturity, innovation and development. I am confident that we will see the SEC say yes because there is no legitimate reason for them not to.”

Matthew Hougan, chief investment officer of Bitwise Asset Management, agreed with him in the second interview.

Hougan stated that there would be even more investor protections and a better product thanks to the “cumulative weight of the evidence that will force them to move forward with approval.” Consumer protection provided by an SEC-run ETF is the cherry on top of a slick product.

ETF speculation aside, Edelman is clairvoyant about the banality of Satoshi Nakamoto’s invention in the future. He summed it up succinctly, saying Bitcoin is “going to be as common in the next couple of years as any other portion of a portfolio.”


Updated: 1-13-2022

What Advisors Should Know About Bitcoin And Inflation

Bitcoin can function as a store of value that avoids the inflation seen with fiat money and helps clients plan for and reach future goals.

When it comes to something as complex as the economy, how do we as humans think we can manage everything so neatly? Dot plots, forward expectations, tapering and rate changes – when a group of people, like those at the U.S. Federal Reserve, is trying to guide the economy, the result is often mistake after mistake. The truth is that no one knows for certain, and everyone is making a guess about the future.

In the U.S., for instance, the creation of new money, as measured by the Fed’s M2, has gone from 5% annualized in the early 2000s to 18% annualized since 2020. The impact has been the highest inflation we’ve seen since the early 1980s.

Home prices have surged, increasing 19.3% in the 12 months ended Nov. 30, according to Zillow. (That comes after a record-setting 2020, with the highest price increase since 2005.)

Car prices were up 13.2% in 2021, and inventory levels are hovering at all-time lows. Beef, pork and chicken prices rose roughly 26%, 19% and 15%, respectively, in 2021. So regardless of where you look and what you consume, life is getting more expensive.

But what if there was a better way to know with precision and confidence the future supply of money, and it could not be changed? Individuals and businesses could better make projections for the future and plan, because price signals in the economy wouldn’t be distorted. This is where bitcoin enters the picture.

In previous articles for this newsletter, I’ve written about bitcoin as a savings tool using a dollar-cost averaging strategy and the ways bitcoin can play a role in a portfolio. Here, I’ll detail how bitcoin can be a store of value that avoids the negative effect inflation has on fiat money like the U.S. dollar.

Why Bitcoin’s Fixed Supply Is Beneficial

Bitcoin is in a class of its own in the broader cryptocurrency ecosystem. Ninety percent of all the bitcoin ever to exist has been mined. Ninety-five percent is expected to be mined by March/April 2026, and the entire amount – the maximum of 21 million bitcoins – by February 2140. When math and code are at the core of a monetary system and not people, it allows for better confidence for the future and the long-term implications.

Math and code are not influenced by a political party, agendas or other factors. The rules are the rules, executed day in and day out.

The current inflation of the Bitcoin network is 1.77%, and it is dropping. A person can know that if they buy bitcoin, they’ll store wealth into the future with certainty, as there’s no way for anyone to devalue or create a new bitcoin. The reason why is the incentive structure that has been built around for miners, holders of bitcoin and the network itself.

Bitcoin, with its 21 million coin supply cap, has the benefits of trust in a fixed-rule system that can be upgraded but remains foundationally unadjusted.

Bitcoin And Purchasing Power

The goal of money is to allow for economic output to be saved for future consumption. Holding cash today in the inflationary environment for a client is a guaranteed recipe to lose purchasing power – while the exact opposite has been true over the years for bitcoin. Money needs to have demand for it to have value. According to a recent report from Grayscale, 25% of investors with $10,000 or more in investable assets own bitcoin.

(Editor’s note: Grayscale is owned by Digital Currency Group, the parent company of CoinDesk.) The demand for bitcoin is increasing, according to Glassnode, as are on-chain analytics as more and more entities begin to own bitcoin.

So, in a world with convoluted and confusing financial markets, a base monetary system as transparent and open as the Bitcoin network is a game-changer. In my view, those adopters who move wealth to bitcoin today will be rewarded. They’ll be able to secure the value they created today into the future, allowing their consumption to remain consistent or grow. Those who lag behind, by comparison, will need to save more and store more wealth to accomplish the same goal.

There’s a term called liability matching in asset allocation. Liability matching is an investment strategy that matches future asset sales and income streams against the timing of expected future expenses. Bitcoin takes this concept and flips it on its head, allowing for goal matching.

The longer a goal is out into the future, the better bitcoin is for saving for that goal, as I’ve previously explained about bitcoin and dollar cost averaging.

You don’t know how many dollars will be created between now and five years from now, but I can with confidence tell you how many new bitcoin will be issued. Which would be more reliable, in your view? The asset that costs $0 to produce, with an unlimited supply, or the asset with known rules, a network of fierce advocates and a cost associated with the creation of new units? We live in a world where dollars and bitcoin coexist, and it’s not an all-or-nothing decision.

How Bitcoin Can Help Clients In The Long Run

As a financial advisor, I believe the role and goal of asset allocation is to help mitigate risks and ensure client outcomes and objectives are accomplished. Today, the word on almost all clients’ minds is “inflation,” and what to do about it.

In my opinion, bitcoin is the remedy that helps ease these client concerns by allowing their savings to gain in value. In a world of plenty of uncertainty, money that costs nothing to create is a problem. Saving for goals is as challenging as ever, and inflation makes life cost more.

But bitcoin is ushering in a deflationary future, where an individual can create value, be paid and store that into the future for when needed, allowing savers to better enjoy the fruits of their labor. That change enables clients to achieve those lifelong goals sooner – and that’s all thanks to bitcoin’s open monetary network.


Updated: 1-13-2022

What Advisors Should Know About Bitcoin And Inflation

Bitcoin can function as a store of value that avoids the inflation seen with fiat money and helps clients plan for and reach future goals.

When it comes to something as complex as the economy, how do we as humans think we can manage everything so neatly? Dot plots, forward expectations, tapering and rate changes – when a group of people, like those at the U.S. Federal Reserve, is trying to guide the economy, the result is often mistake after mistake. The truth is that no one knows for certain, and everyone is making a guess about the future.

In the U.S., for instance, the creation of new money, as measured by the Fed’s M2, has gone from 5% annualized in the early 2000s to 18% annualized since 2020. The impact has been the highest inflation we’ve seen since the early 1980s.

Home prices have surged, increasing 19.3% in the 12 months ended Nov. 30, according to Zillow. (That comes after a record-setting 2020, with the highest price increase since 2005.) Car prices were up 13.2% in 2021, and inventory levels are hovering at all-time lows.

Beef, pork and chicken prices rose roughly 26%, 19% and 15%, respectively, in 2021. So regardless of where you look and what you consume, life is getting more expensive.

But what if there was a better way to know with precision and confidence the future supply of money, and it could not be changed? Individuals and businesses could better make projections for the future and plan, because price signals in the economy wouldn’t be distorted. This is where bitcoin enters the picture.

In previous articles for this newsletter, I’ve written about bitcoin as a savings tool using a dollar-cost averaging strategy and the ways bitcoin can play a role in a portfolio.

Here, I’ll detail how bitcoin can be a store of value that avoids the negative effect inflation has on fiat money like the U.S. dollar.

Why Bitcoin’s Fixed Supply Is Beneficial

Bitcoin is in a class of its own in the broader cryptocurrency ecosystem. Ninety percent of all the bitcoin ever to exist has been mined. Ninety-five percent is expected to be mined by March/April 2026, and the entire amount – the maximum of 21 million bitcoins – by February 2140.

When math and code are at the core of a monetary system and not people, it allows for better confidence for the future and the long-term implications. Math and code are not influenced by a political party, agendas or other factors. The rules are the rules, executed day in and day out.

The current inflation of the Bitcoin network is 1.77%, and it is dropping. A person can know that if they buy bitcoin, they’ll store wealth into the future with certainty, as there’s no way for anyone to devalue or create a new bitcoin.

The reason why is the incentive structure that has been built around for miners, holders of bitcoin and the network itself. Bitcoin, with its 21 million coin supply cap, has the benefits of trust in a fixed-rule system that can be upgraded but remains foundationally unadjusted.

Bitcoin And Purchasing Power

The goal of money is to allow for economic output to be saved for future consumption. Holding cash today in the inflationary environment for a client is a guaranteed recipe to lose purchasing power – while the exact opposite has been true over the years for bitcoin. Money needs to have demand for it to have value.

According to a recent report from Grayscale, 25% of investors with $10,000 or more in investable assets own bitcoin. (Editor’s note: Grayscale is owned by Digital Currency Group, the parent company of CoinDesk.)

The demand for bitcoin is increasing, according to Glassnode, as are on-chain analytics as more and more entities begin to own bitcoin.

So, in a world with convoluted and confusing financial markets, a base monetary system as transparent and open as the Bitcoin network is a game-changer. In my view, those adopters who move wealth to bitcoin today will be rewarded.

They’ll be able to secure the value they created today into the future, allowing their consumption to remain consistent or grow. Those who lag behind, by comparison, will need to save more and store more wealth to accomplish the same goal.

There’s a term called liability matching in asset allocation. Liability matching is an investment strategy that matches future asset sales and income streams against the timing of expected future expenses.

Bitcoin takes this concept and flips it on its head, allowing for goal matching. The longer a goal is out into the future, the better bitcoin is for saving for that goal, as I’ve previously explained about bitcoin and dollar cost averaging.

You don’t know how many dollars will be created between now and five years from now, but I can with confidence tell you how many new bitcoin will be issued. Which would be more reliable, in your view?

The asset that costs $0 to produce, with an unlimited supply, or the asset with known rules, a network of fierce advocates and a cost associated with the creation of new units? We live in a world where dollars and bitcoin coexist, and it’s not an all-or-nothing decision.

How Bitcoin Can Help Clients In The Long Run

As a financial advisor, I believe the role and goal of asset allocation is to help mitigate risks and ensure client outcomes and objectives are accomplished. Today, the word on almost all clients’ minds is “inflation,” and what to do about it.

In my opinion, bitcoin is the remedy that helps ease these client concerns by allowing their savings to gain in value. In a world of plenty of uncertainty, money that costs nothing to create is a problem. Saving for goals is as challenging as ever, and inflation makes life cost more.

But bitcoin is ushering in a deflationary future, where an individual can create value, be paid and store that into the future for when needed, allowing savers to better enjoy the fruits of their labor. That change enables clients to achieve those lifelong goals sooner – and that’s all thanks to bitcoin’s open monetary network.

Could These Products Tame Crypto’s Volatility Beast?

Two crypto products launched late last year, targeted squarely at advisors who are concerned about risk-averse clients, purport to ease bitcoin volatility through trading strategies. But there may be other ways to temper volatility risk in cryptocurrencies.

Now that advisors have several methods for accessing cryptocurrencies and other digital assets alongside and on behalf of their clients, asset managers are launching innovations to offer differentiated access to crypto.

So it is with recently launched crypto products that not only provide access to the token’s price movement in a U.S.-domiciled product wrapper, but also claim to offer built-in risk mitigation.

Two such products – one from CBOE Vest, the other from THOR Financial Technologies in partnership with separately managed account (SMA) provider Eaglebrook Advisors –use technical signals to trade in and out of crypto or crypto futures on behalf of their investors.

This article originally appeared in Crypto for Advisors, CoinDesk’s weekly newsletter defining crypto, digital assets and the future of finance. Sign up here to receive it every Thursday.

“Thus far the biggest story has been just accessing this space, but one of the challenges, especially for professionals committing assets to the space, has been extreme volatility,” said Karan Sood, the CEO of CBOE Vest. “Bitcoin’s long-term average volatility is just short of 100%.”

The Mutual Fund Solution

In October, CBOE Vest launched the Bitcoin Strategy Managed Volatility Fund (ticker: BCTVX), a mutual fund that invests in bitcoin futures, eliminating the need for a bitcoin wallet.

CBOE Vest’s strategy purports to offer some bitcoin-linked returns while controlling for the volatility by allocating to something with a cash-like return during drawdowns.

“Our strategy, at its simplest, will seek to vary the exposure to bitcoin futures in response to the volatility experienced by bitcoin futures,” said Sood. “If volatility is high, then the fund will decrease its exposure to bitcoin futures. If volatility is low, the fund will increase its allocation. So it’s a dynamic allocation to bitcoin futures adjusted on a daily basis.”

CBOE Vest has several products that provide similar risk-adjusted exposure in different product wrappers and asset classes.

An SMA Answer

THOR’s partnership with Eaglebrook has integrated its trading algorithms into SMAs offering advisors direct access to bitcoin and other digital assets held offline in cold storage at Gemini Trust.

THOR’s algorithms control volatility and its technology enables streamlined client onboarding, trading execution, rebalancing, portfolio and tax reporting.

The strategy, which launched in November 2021, moved out of bitcoin at $62,000 to a 100% cash position, sparing its investors much of the token’s price decline, said Brad Roth, founder of THOR Financial Technologies.

“We use our technology just like we do in equities, as of right now when we get a volatility signal we’ll convert to a cash-like position,” said Roth. “Right now, our client is doing what it meant to do. During the recent drawdown we were just sitting there flat.”

THOR launched last year and has grown to over $1 billion in assets under administration (AUA) across its model portfolios.

While CBOE Vest builds products targeted towards financial professionals, Sood said that thus far most of the interest in plain-vanilla bitcoin futures products has been from self-directed investors.

Financial professionals have greater demand – and appreciation – for regulated investment vehicles like exchange-traded funds (ETF) and mutual funds, said Sood, because they are more likely to suit the best-interest requirements by which they are often bound.

“There are other challenges for intermediaries because they are managing these assets in a multi-asset portfolio, and nothing comes close to delivering the kind of volatility – or, historically, the kind of returns – that bitcoin has delivered,” said Sood.

“You would think that most want to offer clients enough access to bitcoin to have the returns move the needle as a portfolio, but that often will result in accepting a certain amount of volatility as well.”

But Skepticism Abounds

Some practitioners in the crypto-for-advisors business are wary of such risk mitigation strategies.

“I wouldn’t say they’re a bad idea,” said Dan Eyre, the CEO of BITRIA, a firm providing advisors access to cryptocurrencies on behalf of their clients. (BITRIA was rebranded from BlockChange late last year.) “The way most investors are looking at digital assets are as an investment they can make that offers a very strong upside, but also a lot of volatility risk.”

Eyre suggests that investors just hold cryptocurrencies directly instead.

“If you look at any two years since the digital asset ecosystem emerged, there’s no period where if you held the investment you would have lost money on it,” he said. “Most actively traded risk-mitigation strategies don’t actually outperform just holding an investment.

Yes, we see a lot of volatility, but that’s okay because most of it is upside volatility. If you try to call tops and bottoms, even through an algorithm, you could miss out on some things while generating a sizable tax bill.”

Sarson Funds, a crypto asset manager and education provider for advisors, has launched its own risk mitigation products.

John Sarson, the firm’s CEO, leveled criticism at the risk-mitigation trading strategies as overly complex.

“Wall Street wouldn’t be Wall Street if it didn’t take a straightforward investment and attempt to wrap it in many different packages ‘to meet investor needs,’” said Sarson. “While some of these products will make sense, others will make more sense for the issuer than they end up making for the client.

Algorithmically derived investment programs may work sometimes, and other times will almost certainly let their users down. At Sarson Funds, we believe that using call writing programs with volatility-adverse investors in bitcoin makes a lot of sense.”

Sarson’s call writing program, most prominently featured in its Crypto & Income strategy, uses the volatility of crypto to create monthly income using covered calls. That income stream helps buffer against down or sideways markets.

Eyre also advocates for fundamental analysis in digital assets for investors seeking additional alpha.

“There’s a good chance that fundamental analysis will perform technical active trading in most cases, but if you do want to do active trading, there are hedge funds you can go to that do that better than anyone else,” he said. “If you were really trying to limit the risk of volatility, if the client is very concerned, then maybe digital assets aren’t for them. There’s nothing wrong with that.”

While Sarson favors a covered-call strategy, he acknowledged that there’s room for several different risk mitigation strategies in the space.

“For investors that otherwise view cryptocurrency as ‘too risky,’ these products add great value by managing risk and bringing a client into this emerging asset class,” said Sarson.


Updated: 1-27-2022

What Advisors Should Know About NFT Investing

The potential of NFTs is undeniable, but the risks and rewards can be head-spinning. Here’s what to look out for when considering an investment in the world of NFTs.

Every day seemingly brings a new scam in the world of crypto, and yet the growth of the industry is in no way slowing.

The popularity of non-fungible tokens (NFTs), at least for now, continues to overshadow news of scams such as “rug pulls,” where NFT creators hype up the value of a new digital asset then cash out once people buy into it.

Consider the recent Frosties rug pull, where more than 2,000 people bought $1.3 million in cartoon ice cream digital collectibles before the anonymous creators shut down their social media pages and disappeared. The collection of 8,888 NFTs still remains, but digital assets are only as strong as their leaders; with nobody to head up the Frosties community, all those pieces of art are nothing more than cute cartoons.


The general guideline among the crypto community is DYOR – “do your own research” – when buying into an NFT project of any size. But in a sector that’s evolving so fast the federal government can’t keep up and hackers are getting away with billions, what constitutes “research” can feel more like Google searches, Twitter Spaces chats and shaky ground.

NFT collectors suggest making friends with others in the space before investing any money in new projects or communities. An easy way with a low barrier to entry is to start by joining free Twitter Spaces chats and Discord communities, where you’ll learn about the added benefits that NFT projects offer buyers (known as utility), industry news and more.

From a financial planning perspective, NFTs are likened to rare collectibles like comic books, authentic artwork, doll collections, sneakers and other alternative investments: Enjoy them, but don’t expect them to fund your whole retirement. (NFTs also involve special tax considerations.)

Except, in some cases, NFTs can change someone’s financial situation dramatically – or at least they have. Consider the World of Women NFT collection, which dropped in July 2021 and had an early average price of .1 ETH (somewhere around $300 USD).

The collection now ranks on OpenSea, where each NFT is valued at 7 to 8 ETH on average (between $21,000 and $24,000 at the time of writing). Or the sold out Women Rise NFT collection, which reached 1,900 ETH in trading volume (approximately $5.9 million at the time of writing) in just a few months.

Buying an NFT creates an indelible record of digital ownership on the blockchain, so the tokens can therefore serve as a membership ticket of sorts. It’s not every community’s recipe for success, but many NFT creators added value to their projects through utility to NFT purchases, awarding investors with exclusive access to online clubs, gaming communities, Discord chat rooms and interactive experiences – all in addition to the art itself.

The Risks And Rewards Of NFTs

All this fast money has the NFT world divided. On one hand, the potential of NFTs is undeniable, but on the other, the risks and rewards are a bit head-spinning.

“This NFT thing is like when a dog gets a new toy and they just keep ripping the toy out. And then now they don’t have a toy,” said Nelson Merchan Jr., co-founder and CEO of blockchain public relations firm Light Node Media. “ It’s kind of like we’re almost doing the same thing, and we’re realizing, ‘OK, maybe we shouldn’t do it this way.’”

A crypto investor since 2017, Merchan has owned NFTs from the popular Pudgy Penguins collection since shortly after it dropped in June 2021. The Pudgy Penguin founders were recently ousted by frustrated collectors who were tired of waiting for the project to deliver on its grandiose promises.

But Merchan, surprisingly, isn’t terribly concerned about the state of his Pudgy Penguin NFTs, noting the promise inherent in what the situation demonstrates.

“It was definitely not a rug pull,” said Merchan, noting that rug pulls happen with speed and anonymity. During the alleged Bored Bunny rug pull on Jan. 5, for instance, scammers seemingly made off with 2,000 ETH in just a few hours before silencing their social media accounts.

The Pudgy Penguins project stands a chance, Merchan argues, because the process of replacing the leaders was community-driven, public and more or less democratic.

“Some of these projects that have been failures are actually really good,” he said. “The community, through the failure, is having to figure out how to build something from this really cool NFT and say, ‘Let’s make it work.’ Those are the NFT projects that I think have significant potential to grow because it’s the community saying we’re going to do something about it. At the end of the day, with NFTs and really crypto in general, it’s all about the community. If the community is strong, the project is going to be strong.”

When it comes to long-lasting value, investors should think into the future about ways that NFTs can integrate with existing infrastructure, argues Merchan. Through smart contracts and QR codes, NFTs have the potential to unlock greater value in both the metaverse and the “real” world through ticketing, VIP memberships and sales.

Consider the club scene. “People go to the club party, they order bottles, the promoters are there,” Merchan said. “The club is always looking for ways to keep people coming back and excited about their brand. This is where NFTs are going to be perfect.

Say you attend the club a few times in that month; you’re getting a specific amount of NFTs each time you go. Maybe the level of the NFT increases in rarity if you go, let’s say, three or four times in that month.”

Rare NFTs will theoretically determine whether a person gets rare perks. And all these transactions will exist on blockchain, a sort of digital ticket stub that definitely beats the shoebox most of us kept collectibles in as kids.

Decentralized Value Investing

It’s almost as if investing in an NFT community could be considered a form of decentralized value investing.

“I’m really investing in the community, or at least the potential of the community to come out of these NFTs,” Merchan told CoinDesk. “If you look at it from the outside, they’ve been failures – almost all of them. But the energy is actually really strong.”

The trick is to not buy the hype, no matter how enticing. “It’s just a very crazy industry. You have to keep more of a long-term perspective. If you’re buying an NFT to flip it, well, that’s just trading. There’s a lot of risk involved,” said Merchan.

“But if you’re buying it because you truly like the community, or because something about it intuitively makes you feel like it is going to go somewhere, that I think is a lot more appealing,” he noted.

Where Should Advisors Go For Crypto Education?

A growing number of services and resources offer advisors education on crypto, taking different approaches. Existing certification organizations, like the CFP Board, might also need to step in and provide clarity and education for their members.

If 2021 was the year that many wealth management firms started taking cryptocurrencies and digital assets seriously, then 2022 has to be the year when financial advisors educate themselves in-depth on the topics crucial to understanding and working with them.

But Where Should They Turn For This Education?

Over the past few years, a number of educational services have come online for financial advisors, initially spearheaded by asset managers eager to give professionals enough knowledge to embrace their products and strategies.

“The digital assets space is exploding, the level of interest is growing exponentially,” said Ric Edelman, the founder of the Digital Assets Council of Financial Professionals (DACFP). “We launched our certificate in May, haven’t done much to promote it, but already have 600 advisors who have completed our courses and more than 1,500 advisors enrolled.”

One Asset Class, Many Options

Previously, firms like Eaglebrook Advisors and Sarson Funds built out their own content oriented toward financial advisors.

There’s nothing necessarily wrong with the information that asset managers put out there – in fact, they often serve as partners to unaffiliated advisor education services – but advisors perhaps more than anyone else understand that investment shops often can’t resist the opportunity to talk up their own book, at times to the detriment of alternative solutions.

That’s why a set of advisor-led resources has recently come online to teach financial intermediaries about cryptocurrencies.

One of the first, established last year, is Onramp Academy, a service developed by tech platform Onramp Invest.

“Advisors need to be educated by a group of people who understand both the crypto space and financial planning intimately,” said Caitlyn Cook, vice president of operations for Onramp Academy. “Advisors need to understand how crypto impacts their practice, and there’s not been a lot of content specific to those needs.”

Another option is the DACFP’s Certificate in Blockchain and Digital Assets.

Then there’s the Certified Digital Assets Advisor (CDAA) designation, created by decentralized autonomous organization (DAO) PlannerDAO. The CDAA is distinct from other offerings in that a decentralized network of financial advisors oversees its requirements and curriculum.

“I feel like any advisor education is good to have in the marketplace, said Steve Larsen, CEO of PlannerDAO. “We feel like most certifications are just introductions and that the CDAA offers more comprehensive education that covers all areas of digital assets.”

Which Offering Is Best?

Edelman believes that the Digital Assets Council’s certificate will be the gold standard for financial advisors. The curriculum includes 13 hours of self-study educational material divided into two parts of five modules apiece, taught by industry leaders including Edelman; Lex Sokolin, head economist and global fintech co-head at Consensys; MarketCounsel President Brian Hamburger and Shawnna Hoffman, global co-leader of IBM’s Cognitive Legal Practice.

“Part one is built around the understanding of the technology, with part two about incorporating digital assets into an investment strategy for financial advisors and firms,” Edelman said.

“By completing the courses, advisors will be able to determine which clients should have an allocation to digital assets, how much that allocation ought to be and what type of investment the advisor should use to create that allocation, and in addition understand the taxation regulation and compliance issues so they can operate within the rules to serve the client’s best interest.”

But Onramp Academy has also developed an impressive curriculum with qualified instructors, in partnership with Galaxy Digital, Interaxis and CoinDesk, among others.

“We provide everything from ‘what is bitcoin or blockchain’ all the way to crypto estate planning, tax planning and getting crypto within a diversified portfolio,” said Onramp Academy’s Cook. “Our educational partners include asset managers, but also we have CFPs and practicing advisors on the team.”

The Onramp curriculum is backed by a steady stream of crypto news and resources delivered to Onramp Academy members on a regular – almost daily – basis, and a robust online and social media community of financial professionals.

PlannerDAO’s curriculum is also quite robust, but with an added bonus of offering advisors the ability to access the DAO that operates the CDAA certification and participate in the governance of the credentials.

“We view [crypto] as more of an ecosystem than an asset class,” said Larsen. “It relates to a client’s employment, their social and leisure time, the generational wealth transfer, tax planning – all areas of their finances, so it’s important that we make sure that advisors understand it.

With the CDAA, people are really into this – for the first time in their careers, many advisors feel like they are connected to the industry and have a say in what’s happening.”

PlannerDAO, Onramp and the DACFP each claim to take advisors from general knowledge on the asset class to bringing digital assets into a firm or practice to specific actions and dialogues to implement with clients.

“I think what advisors really want and need is one-stop shop where they can get advised access, education, client services, in-depth research, security, compliance and technology integration,” said Eaglebrook CEO Chris King. “We make our advisors go through training modules to learn the merits and risks of investing in crypto. They need to score over 70% on our test before they can start onboarding clients to our strategies.”

A Unified Solution?

In the end, the best solution for advisors may be to roll digital assets and cryptocurrency into already existing designations often considered “best in breed” for different sectors of the wealth management industry.

For example, the Certified Financial Planner designation offered by the Certified Financial Planner Board of Standards and the Chartered Financial Analyst (CFA) designation offered by the CFA Institute could be changed to include more digital assets education.

That idea is behind a proposal from Onramp Academy to merge digital assets education into the CFP and CFA curricula. Onramp argues that the time for advisors to learn about digital assets is now, and that most of the initial and continuing education for financial advisors is currently associated with the CFA and CFP designations.

“We strongly believe these two designations will continue to be the gold standard in the financial industry,” said Cook. “This is a multibillion-dollar asset class; we believe that the curricula for both the CFA and the CFP need to be more inclusive of technology advances over time. Digital assets are one of the bigger changes in the space; they need to be incorporated into the curricula.”

Notably, both the CFA Institute and the CFP Board appear open to the idea, as each has approved externally provided digital assets programs for continuing education credits – for example, the DACFP’s curriculum offers 13 hours of continuing education for the CFA and CFP designations.

“Everyone is talking about volatility and what we do now, but education never goes into a bear market,” said Cook. “This is a great time for advisors to have conversations with clients about crypto – but they need to get educated on the asset class first.”


Updated: 2-17-2022

How Much Crypto Should Be In A Portfolio?

What’s the right amount of crypto to hold? Financial advisors, certified financial planners and other money experts are beginning to recommend specific allocations.

Advisors have been dismissive of crypto ever since bitcoin came on the scene in 2009. And understandably so: Due to regulatory restrictions, advisors can’t simply log on to Kraken, Gemini, or Coinbase and add a small sprinkling of crypto to their clients’ portfolios, some of which they’ve been managing for decades.

“Advisors can’t touch those retail exchanges with a 10-foot pole,” says Ben Cruikshank, the head of Flourish, a crypto platform for registered investment advisors (RIA). “They don’t have something like a big exchange where people can sign up in five minutes and open an account.”

This article originally appeared in Crypto for Advisors, CoinDesk’s weekly newsletter defining crypto, digital assets and the future of finance.

Sign up here to receive it in your inbox every Thursday.

Furthermore, the classic “if it isn’t broke, don’t fix it” mentality also keeps advisors from putting their clients’ retirement investments – and their companies’ reputations – on the line.

“Advisors have very successful practices and they’re managing a lot of money,” says Ric Edelman, the founder of the Digital Assets Council of Financial Professionals (DACFP). “They’re managing hundreds of millions of dollars, often billions of dollars – and they are doing very well.”

For the most part, investment returns have been favorable, Edelman argues – just look at the performance of the stock market in the last three years, averaging somewhere around 20% a year.

“Why disrupt that?” explains Edelman. “The advisors have a stable, steady practice.”

But then came bitcoin’s epic all-time high of over $68,000 in October and consumers couldn’t ignore their crypto curiosity anymore. However, crypto is unlike any asset class that’s ever existed, which means advisors can’t follow the same old rules.

Historic Allocation Rules Of Thumb

Advisors’ notions of proper portfolio management is rooted in modern portfolio theory, says Edelman. This theory was shaped by Nobel Prize-winning philosophies from the likes of economists such as Harry Markowitz, William Sharpe and Eugene Fama. Behavioral finance research says this: If you aren’t going to make a material allocation in your portfolio, you shouldn’t make an allocation at all.

“No financial advisor would ever say to a client, ‘Buy one share of Microsoft,’” Edelman explains. “What’s the point? If you’re not going to make a meaningful allocation, it’s not going to move the needle.”

This way of thinking is part of the reason why common asset allocations include a rough minimum of 10% for a certain type of security. “Advisors routinely tell their clients to put 60% of assets into stocks and 40% into bonds,” Edelman says. “They don’t tell clients to buy 1% of stocks.”

But What About When It Comes To Crypto?

Crypto Allocation Recommendations

A 2019 Yale study found that 4% to 6% is an appropriate amount of a portfolio to allocate to crypto. The study included all cryptos, naming bitcoin, XRP and ether specifically. Financial advisors, certified financial planners and other money experts are increasingly beginning to rally around a 1% to 5% asset allocation recommendation for crypto.

And interestingly, the Brazilian city of Rio de Janeiro invested 1% of its treasury reserves in crypto last month, which will make for an important case study on a governmental level.

A 1% allocation, according to Edelman, is something of a magic sweet spot. It’s small enough that a market crash would be almost undetectable while still exposing average investors to potentially double the returns they would see without it.

While the amount of institutional investment in crypto seems to be making a total collapse less and less likely, consumers and advisors are understandably still holding their breath. Therefore, Edelman notes, 1% is enough of a contribution to be considered “material.”

Edelman plugged this pattern into a hypothetical scenario involving what he describes as a typical portfolio containing a 60/40 asset mix. Historic data from around the time of bitcoin’s historic 2017 bull run shows a 1,500% rise in bitcoin’s price, followed by a dip of 84%.

A portfolio with no bitcoin would see returns of around 7% in one year (estimated conservatively) and, thanks to compound interest, 14.5% in two years. But changing that asset allocation slightly to 59/40/1 – a 1% addition of crypto – the potential gains could jump to 22% in year 1 and 15.4% in year 2 (with the 85% dip), ultimately coming out ahead.

And in the rare event that crypto crashes entirely, the 59/40/1 allocation still results in a 6% return in year 1 and 13.4% in year 2, says Edelman.

“This shows that the allocation can materially improve the return but the downside risk is insignificant,” he says.

Bottom Line

While crypto is still a nascent asset class, a growing number of advisors are invested in finding credible information to share with their clients. Financial professionals arguably need to stay knowledgeable about the digital asset ecosystem and remember there’s often better advice to give to a crypto-curious client than to just avoid the asset class altogether.

For clients who are interested in adding a small but material allocation of crypto to their portfolio, advisors can start with just 1%, always thinking about the potential risks compared to the possible rewards. In fact, some argue that 1% is not only a safe place to start but the best allocation for most everyday investors.


Updated: 3-25-2022

Financial Advisers Aren’t Sold on Crypto

Trading rules, volatility and risk are some of the reasons advisers are hesitant to recommend the digital assets

Investment advisers are still conflicted about putting clients into crypto.

A January survey from BitWise Asset Management of 600 financial advisers found 15% allocated a portion—usually 5% or less—of their clients’ portfolios in crypto in 2021. That is up from 9% a year ago and 6% two years ago.

Still, 85% of advisers still aren’t investing in cryptocurrencies for clients.

Over the past two years, cryptocurrencies burgeoned from a fringe movement into a full-blown investing mania that at its peak was worth $3 trillion. The price of bitcoin jumped from around $9,000 before the pandemic to nearly $69,000 in November 2021. It has been part of the meme-trading mania, a big advertiser in the Super Bowl and even a source of funding for Ukraine after the Russian invasion.

Financial advisers are treading lightly. For some, their own trading rules restrict them from holding cryptocurrencies for clients. Advisers can recommend only regulated investments and there is still a regulatory fog over crypto, so many advisers just steer clear.

The Securities and Exchange Commission has approved only one Bitcoin exchange traded fund so far. For other advisers, the volatility and risk are the issue. While the volatility may not dissuade young investors who can afford to take big risks, it is different for investors who have already spent years building a nest egg.

Most of Russell Wayne’s clients at Sound Asset Management in Weston, Conn., are in their late 50s or early 60s, he said, at a point that they should be laying off risk, not taking on more. While he has taken the time to understand how crypto operates, he still thinks it is too risky for his clients.

That risk is manifest in the fact that bitcoin is currently down about 36% from its November high.

“I want to make sure they’re not calling and saying ‘What the hell did you do?’” he said.

But clients are increasingly crypto curious. In the BitWise survey, about 94% of advisers said they got questions about crypto.

Adam Koos, the founder of Libertas Wealth Management Group in Columbus, Ohio, has been fielding questions about crypto and has bought a few trust products on clients’ behalf, but said in general he isn’t comfortable carving out a large percentage of his clients’ portfolios and putting it into crypto.

It is a great asset to trade, he said, given the volatility and the wild swings, but it is much harder to justify as part of a stable portfolio. “When you talk to your clients about stocks or bonds, in almost all cases I can confidently say they’re not going to zero,” he said.

His biggest concern is that cryptocurrencies have the potential to lose most if not all of their value. “I have a hard time recommending it as an asset class,” he said.

Barry Ritholtz said a number of his clients at Ritholtz Wealth Management in New York lately have wanted him to invest a portion of their portfolios in crypto, as he would in any other asset. That raised logistical issues for him, though.

To buy a stock, for example, an investor needs a broker to do it on their behalf, and there are a host of other intermediaries that handle all the other aspects of trading and custody.

Cryptocurrencies, on the other hand, can be bought directly from another user, but that presents a problem: If an investor holds it directly, using their own “wallet,” they are responsible for securing it—and there are many stories of people losing access to their own wallets.

Mr. Ritholtz’s solution was to make his own index, developed with WisdomTree and the crypto exchange Gemini as the custodian. The index, which operates as a separately managed account managed by a firm called OnRamp Invest that holds 15 different cryptocurrencies on behalf of investors, launched in December. It isn’t something Ritholtz Wealth includes in its model portfolios, but it is available to customers who want crypto.



How Financial Advisors Should Think About the Crypto Crash

Billions of dollars have just been erased from the crypto market, but that shouldn’t spook FAs.

The last several months, and especially the last couple of weeks, have been unkind to crypto markets. The downturn in prices – and the torpedoing of the store-of-value and non-correlated-asset theories about crypto – have turned many in the public square against digital assets as both an investment and a new financial system.

Financial advisors who were thinking about adding crypto to their practices several months ago are likely taking a second look, and rightfully so.

Downturns aren’t fun, but often they’re also opportunities. Contrary to conventional wisdom, could this be a good time for financial advisors (FAs) to learn about and potentially implement digital assets into their practices? Let’s discuss.

First, What Happened?

Without going back too far in the annals of crypto lore, we can look to November of 2021. With the world opening back up following the COVID-19 pandemic, and the realization that we now have trillions more dollars in circulation, not to mention supply-chain and production issues, tech stocks started finally falling in value. Bitcoin and crypto also started falling from their all-time highs.

At the time, this was just seen as healthy overall, even with a 40%+ drawdown in bitcoin price.

Then, in May, Terra happened. The $40 billion layer 1, or base layer, network lost almost all its value in a few days, pushing the price of bitcoin down through forced selling in an effort to remain solvent. This drastic fall highlighted some negatives related to crypto, specifically the centralization, poor incentive mechanisms and adherence to propped-up yield as a tool.

While the prices leveled out, the overall economy kept looking worse. With 40-year highs in inflation, more supply chain issues and record energy prices, talk of a coming recession began, which has brought a flight to liquidity and safety from all risk assets.

The Nasdaq, the S&P 500 and crypto all fell. The multiple steep drops in bitcoin and ETH, led to the liquidation or near collapse of several hedge funds and lending platforms, such as Celsuis and Three Arrows Capital. More forced selling, more falling prices.

Bitcoin fell below $20,000, and ETH below $1,000. For the last couple of years we thought we would never see these levels again … but here we are.

As an advisor, you could choose to just ignore crypto for a few years, or altogether. Based on recent events, price action and narratives, I wouldn’t blame you. You have plenty of possible investment options for your clients.

If, on the other hand, you’re still determining which direction to take, here are some points for consideration.

Networks In Use

While the prices of the crypto assets are way down, the networks and protocols underlying those assets are still being used. A recent report from the Fed (yes, that Fed) shows that possibly 40 million Americans are using cryptocurrency in some form.

Up to 6 million of those people are using it for payments of some sort, and 60% of them have an income below $50,000.

The very people who need a new financial system are using it as intended. And the use of the networks will eventually drive the infrastructure, adoption and value of the assets.

Also, the most recent price downturn due to liquidation happened in a very traditional finance way. Centralized entities were using leverage with crypto as the collateral. For the most part, they were not using the decentralized financial system.

The decentralized finance (DeFi) protocols built for lending and trading have held up just fine so far, even with the extreme volatility and liquidations.

Increasing Our Understanding

While in the up-only, speculative mode, most people just pour money into tokens and protocols that produce the highest return or have a chance at an outsized return.

There is maximum FOMO, or fear of missing out, at this stage, and we seldom look at the risks investors are taking to achieve those returns, other than the volatility of the assets.

When we’re in a situation like we’ve seen in the past several months, we start to better understand the risks of the interconnected system, leverage, lack of transparency, etc. We have seen the poor incentive system which could be gamed in Terra, and the rehypothecation and leverage of Celsius and Three Arrows Capital.

As an industry, we are increasingly understanding the risks inherent in the system, and how we can identify them before they negatively affect us and our clients. What are the risks of holding digital assets on an exchange, or even lending them to a centralized company, and is the return you receive enough to compensate for the risk?

We are getting better at comprehending the value of transparency as well, as we can predict the level at which major liquidations will happen, and even identify the parties that can be liquidated.

The increased understanding of transparency and value flows is also contributing to the better potential analysis of the value of certain protocols and their requisite tokens.

Regulation Is Coming

Even before the downturn, the growth in value and popularity of crypto had pushed U.S. regulators and legislators to talk about increased regulation. The recent events have given them even more to talk about.

U.S. Sens. Cynthia Lummis (R-Wyo.) and Kirsten Gillibrand (D-N.Y.) introduced a bipartisan bill to Congress, and it followed the executive order from the Biden administration, which gave various agencies marching orders with regard to regulating crypto assets.

We will likely see more guidance and regulation in the coming 12 months, partially to protect investors and partially to protect the dollar. This will make advisors, wealth managers, institutions and investors feel a bit safer allocating to crypto.

What This All Means For Advisors

The growth in value and notoriety of the crypto industry in the past few years created tremendous growth in the infrastructure, while building a wall of cash in venture capital funds waiting to be deployed into the decentralized finance ecosystem.

As an advisor, this is a great opportunity for you. The decentralized financial tools of crypto will continue to be used and grow. More money will be poured into the applications, driving even more adoption.

Your clients, and prospective clients, will need you to be the expert to help keep their money safe, have intelligent conversations around risk and reward and educate them on the value of these assets and protocols.

They will need help from someone versed in finance to explain why the potential to earn 20% is still bad if the risk is too much.

They will need help from an expert to determine how and where to custody their assets.

They will need help understanding how they can earn yield using the DeFi system, and do so in a safe manner.

In the early 2000s, tech stocks experienced a severe crash. But the years after turned out to be the best time for investing early in the technology. This might be the equivalent moment in crypto, which makes the next few years the best time to start helping clients with their crypto allocation.


Updated: 10-6-2022

How To Pick A Financial Advisor

This guide decodes the wide variety of certifications and services—along with a checklist of what to ask before you choose.

Unless you’re a financial whiz with time to spend managing your money and assets, you might want some guidance on saving for a down payment or investing for your kid’s college education or your own retirement. That’s where a financial advisor can help.

Finding the right advisorto fit your needs, however, is not so easy. There are about 200,000 to choose from.

Their certifications, fees, minimums and services can vary widely and not all of them act as fiduciaries, putting clients’ needs above their own.

Before you engage an advisor it helps to have some basic knowledge about your options, and, most important, what you hope to get out of it.

“The first question for consumers is: Why are you hiring an advisor?” says Micah Hauptman, director of investor protection at the nonprofit Consumer Federation of America. Figuring out whether you need help budgeting, investing or hitting long-term financial goals will help you decide what kind of advisor to hire.

Read On To Get Started:

Looking for a Financial Advisor? Get matched to a financial advisor.

Types Of Financial Advisors

Many financial professionals, including financial planners, securities brokers, investment managers, and insurance brokers call themselves financial advisors so it’s important to know exactly what services an advisor provides before hiring one.

* Securities and insurance brokers, for example, sell financial assets and are paid commissions for the products they sell, which can create conflicts of interests.

* Registered investment advisors create financial plans and invest client assets based on those plans. They don’t have that conflict of interest unless they also sell commission-paid products, but they may set an asset minimum that is greater than the assets you have to invest.

* Wealth managers are usually a financial advisor who works exclusively for high net worth clients, with at least several million dollars in assets.

* Robo advisors are also digital-only advisory services producing computer-generated portfolios based solely on the information that the investor provides online. They charge less than human advisors but some provide access to human advisors for an additional fee.

Financial Advisor Designations

There are myriad designations for financial advisors but only a handful that indicate the expertise most consumers need.

Those designations, listed below, require that advisors pass an extensive test or series of tests, have thousands of hours of work experience in financial planning or a related field and maintain their credentials through continuing education courses or events.

CFP, or Certified Financial Planner, a designation awarded by the Certified Financial Planning Board of Standards, is considered the most prestigious, requiring knowledge on more than 100 financial topics, including stocks, bonds, taxes, retirement and estate planning.

Advisor Fees And Minimums

How a financial advisor gets paid can be as important as how much you pay them because you want an advisor whose paramount consideration is your best interest, not their own, and whether or not that is the case is largely determined by how you pay them.

There Are Three Basic Models For Financial Advisors’ Compensation:

* Commissions, Linked To The Products In Which They Invest Clients’ Money

* Fee-Only, With No Commissions

* Fee-Based, Which Combines Commissions And Fees

Most consumer advocates recommend investors stick with fee-only financial advisors, because these are fiduciaries, and must act in your best interest.

By contrast, advisors who receive commissions on products they sell may not always be acting in their client’s best interest.

It can get confusing, however: Under the SEC’s Best Interest rule, advisors can say they are putting their client’s interest first so long as they disclose how they’re paid, any disciplinary history and incentives to sell certain products.

That’s why many consumer advocates recommend sticking with fee-only advisors.“With fee-only you can be confident that you are dealing with a real fiduciary,” says Rostad.

How Fee-only Financial Advisors Work

Fee-only advisors can be paid in multiple ways, each with its own advantages and disadvantages. While annual fees are common and require little upfront outlay, an hourly rate may end up being cheaper if your needs are straightforward.

“I think it’s fair to say that virtually anybody can access professional financial advice with one of these alternative payment plans,” said Rostad.

Annual Percentage Of Your Assets

The most popular is payment as a percentage of assets under management, or AUM, with annual fees typically around 1%. Most, but not all, such fee-only advisors usually require a minimum of assets ranging from $250,000 to several million dollars.

An investor with $500,000 in assets, for example, would pay around $5,000 a year, deducted from their account balance, usually quarterly. They might also be charged separately for the creation of a financial plan, which tends to run around several thousand dollars.

Hourly Rates And Other Options

Other fee-only advisors charge monthly subscriptions, flat fees, hourly rates or by the project. Members of the Garrett Planning Network, charge an hourly rate, which is usually a few hundred dollars.

Advisors at Facet Wealth, who interact with clients only virtually, charge a flat annual fee based on the complexities of a client’s financial situation. Fee-for-service advisors who are part of the XY Planning Network, have a flexible payment model that includes payment as a percentage of AUM, flat fee, retainer or hourly rate.

Robo Advisors

Another cheaper option for investors is to engage a digital, automated advisor service. These so-called robo advisors usually charge a relatively low annual fee—closer to 0.25% of the assets you invest—but about twice that if they also offer access to human advisors.

Some robos, like Fidelity Go, charge flat fees and Schwab’s Intelligent Portfolios Premium, which provides access to human advisors, charges a $30 monthly subscription rate after an initial $300 fee.

Don’t Forget The Separate Fund Fees

In all cases, investors will pay a fee for the advisor plus additional fees for the investments they use whether they be mutual funds or exchange-traded funds, also known as ETFs or individual stocks or bonds.

How To Find A Financial Advisor

Finding a financial advisor is not so different from finding any other specialized service you’re in the market for.

You can ask a friend, relative or colleague for a referral, which is how most financial advisors connect with clients, or you can research advisors online by googling or visiting specific websites.

These Major Trade Groups Have Websites Where You Can Search Advisors By Location:

* National Association Of Personal Financial Advisors (NAPFA),

* Financial Planning Association (FPA)

* Certified Financial Planner Board Of Standards

There Are Also Smaller Networks That Are Highly Reputable And Whose Members Do Not Collect Commissions:

* Garrett Planning NetworkHas Advisors Who Work For Hourly Fees (As Opposed To An Annual Percentage Of Your Assets)

* XY Planning Network Has Advisors Who Are Paid Based On The Services They Provide And In A Variety Of Ways: Via Retainer, Subscription, Hourly, Flat Fee And Aum

You Can Also Check Out The Directory Of Advisors At Our Sister Website:

* Barron‘S Financial Advisor Network

Once you’ve narrowed your search to two or three providers, “you should interview them because ideally you’d like to stay with a provider for a long time [and] have a really good relationship with them,” said Skip Schweiss, chief executive of Sierra Investment Management and board chair of the Financial Planning Association. “Part of that is human chemistry.”

Here Are Some Questions You Should Ask:

* What Type Of Financial Advisor Are You And What Professional Designations Do You Hold?

* Are You A Fiduciary?

* What Services Do You Provide?

* How Do You Get Paid?

* Do You Invest Client Funds In Commissioned Products Or Proprietary Products, Participate In Any Revenue Sharing Arrangements Or Engage In Principal Trading (Taking The Other Side Of The Trade With An Investor)?

* If I Gave You $1,000 To Invest How Much Would Go To Fees And Costs And How Much Would Be Invested On My Behalf?

* What Investments Do You Focus On—Individual Stocks And Bonds Or Investment Funds? Within Funds, Do You Favor Active Or Passive Funds, Exchange-Traded Funds Or Mutual Funds, And What Is The Range Of Their Fees?

* What Would Be My All-In Costs For Your Services? And Do Those Costs Mean You Will Actively Manage My Investments Throughout The Year? (The Latter Is Especially Important For Those Advisors Who Charge A Percentage Of Assets.)

* What Is The Minimum Asset Level Required, If Any?

* Have You Or Your Firm Been Subject To Any Disciplinary Actions By Regulators Or Others, And If So, What Are They?

* How Long Have You Been An Advisor?

* Will You Be My Primary Contact Or Who Will Serve That Role?

Many of these questions are included in NAPFA’s Comprehensive Financial Advisor Diagnostic questionnaire and answered in Form CRS, or Customer Relationship Summary, which financial advisors and brokers are required to provide to prospective retail clients.

Form CRS is the third part of advisors’ registration form with the SEC known as Form ADV, which can be found at the SEC’s Investment Adviser Public Disclosure website.

Consumers can also access any disciplinary history of brokers at the BrokerCheck website maintained by the Financial Industry Regulatory Authority, the self-regulatory organization for the brokerage industry.

They can also check the background and disciplinary history of a CFP-designated advisor at the CFP’s verification website.

Investor.govis another website from the SEC which provides access to information about advisors as well as general investing information for consumers.

Remember You Are In Charge

A good financial advisor should be able to answer all your questions clearly, without industry jargon, and you should feel empowered to circle back with follow up questions if you aren’t completely clear on their services.

There are plenty of resources to help and potentially a big payoff at the end. The right financial advisor can help navigate your financial life, from budgeting everyday spending to fulfilling long-term financial goals over a lifetime including the purchase of a home and a comfortable retirement.


Updated: 1-23-2023

Crypto Marketing Needs To Change. Let’s Make 2023 The Year For Influencer Accountability

FTX was just like the ill-fated Fyre Festival: a hollow project fueled by mendacious influencer marketing, says Oxygen’s Nemo Yang.

Sold a beachside paradise with A-list models including Kendall Jenner, millennials swarmed to the Bahamas in 2017 for the ill-fated Fyre Festival.

We all know what happened next: Wrecked local businesses, dilapidated cheese sandwiches and deceived customers who formed a class-action lawsuit against organizers who used their money to bankroll decadent lifestyles. At the core of the media circus was the role of influencer marketing.

Having failed to properly vet the new concept or disclose financial relationships to Fyre, celebrities poneyed up after government agencies came knocking. Jenner, for instance, was forced to pay $90,000 out of pocket for her role in promoting the festival.

From the tropical environment to the dynastic celebrity families involved, Fyre Festival mirrors the FTX meltdown and other prominent crypto scandals that have blown up these past few months.

Despite the lack of regulatory clarity surrounding crypto, much less the compliance scrutiny that traditional financial institutions face, Tom Brady gave FTX his seal of approval as Sam Bankman-Fried’s team proceeded to lose billions of dollars while racking up $55,000 bar tabs at Jimmy Buffet’s Margaritaville in the Bahamas.

Kendall Jenner’s half-sister, Kim Kardashian, likewise found herself in the crosshairs of regulators and had to pay a $1.26 million fine for promoting ethereumMax – essentially, a pump-and-dump scheme.

In a further twist of irony, the land in Great Exuma where Billy McFarland held Fyre is now being sold as non-fungible token (NFT) parcels, marketed towards crypto heads by the same developers behind Miami Beach’s Setai hotel.

Celebrities, and their managers who present advertising opportunities, owe a responsibility to fans and followers to properly vet products and services, and to actually understand what they’re promoting.

While most builders in Web3 understand the risks of investing in cryptocurrency projects and have some lay of the land regarding DeFi architecture, it’s unlikely that Kim Kardashian’s 228 million Instagram followers are well-versed in topics like portfolio allocation.

They are sheep being led to the slaughter by someone who has never even ventured an opinion on Ethereum.

Celebrities, unfortunately, are only part of the problem with the current state of crypto marketing. An industry of Web3 YouTubers, Twitch streamers and TikTok stars emerged during the coronavirus pandemic.

While most of these creators posted videos in good faith and wanted to share their passion for crypto and blockchain, there are, unfortunately, others who profited off retail, failing to disclose when they were paid to shill or when they took profits.

To create a Web3 free of bad actors promoting pump-and-dump schemes, the incentive structures need to change for crypto marketing.

While the U.S. Federal Trade Commission already requires individuals to disclose payments for promotions, Web3 is full of unproven startups, value propositions and teams requiring even greater accountability. Promoters in this space need to explain why they chose to align themselves with certain brands.

Unlike skincare products or merchandise, cryptocurrencies directly impact financial markets and carry the risks for derivatives trading and contagion into other institutions.

With all transactions visible on a public ledger, blockchain tech is built with transparency in mind. Those who tout the technology’s virtues should abide by this essential principle from both a legal and moral standpoint, and the industry needs to hold them accountable.

Crypto influencers, marketers and PR professionals need to spend more time digging into blockchain’s foundational architecture and uncovering their own ideology toward crypto and decentralization as a guiding force for selecting projects to endorse.

Only by educating themselves first can they educate others. This statement should be obvious, but in the wake of the failed FTX and Celsius Network, the industry needs to adopt a “no tolerance” policy for promoters who blatantly hype brands without understanding or respecting the core technology.

As a first step, companies and influencers should begin measuring their social media reach for campaigns as a way to quantify their potential impact on financial markets and large population swaths.

Oxygen has made it our mission to bring transparency to Web2 and Web3 growth marketing by using data analytics to understand creators and brands online, as well as relevant on-chain activity, to verify their legitimacy.

We’ve also seen our partners in the industry such as CreatorDAO, a financing and technology platform assisting creators, play an active role in educating influencers on the best advertising practices to protect their audiences.

By being transparent with who they are targeting, and how they are doing so, marketing teams will take an important step in embracing accountability.


Updated: 5-8-2023

Two Advisor Credentialing Organizations Have Their Say on Crypto

Advisors are warned by the Certified Financial Planner Board of Standards (CFP Board) and the Chartered Financial Analyst Institute (CFA Institute) to look before they leap.

After federal regulators including the Securities and Exchange Commission and the Department of Labor as well as Finra, the largest independent industry regulator, perhaps no one speaks louder on advisor best practices and compliance than the Certified Financial Planner Board of Standards (CFP Board) and the Chartered Financial Analyst Institute (CFA Institute).

Each has recently made major announcements regarding cryptocurrency investing and advice.

The CFP Board issued guidelines in November in a Notice to CFP Professionals Regarding Financial Advice About Cryptocurrency-Related Assets, which will govern how holders of the CFP certification should handle working with clients on digital asset investing and planning.

In the CFA Institute’s case, it comes in the form ofCryptoassets: Beyond the Hype,” a report oriented towards investment professionals and financial analysts, which was released this week.
CFP Board

In its report, the CFP Board chose to neither mandate nor forbid its designation holders from recommending cryptocurrencies and cryptocurrency-related assets or providing financial advice about those investments.

The Board will apply the same standardsto cryptocurrencies and cryptocurrency-related assets that it applies to all assets; however, it also recognizes that these assets may present heightened risks to clients and have some unique attributes.

“CFP Board’s guidance for a CFP professional to act with caution when providing Financial Advice about cryptocurrency-related assets rests upon the guidance that regulators have issued concerning these assets,” the organization wrote.

“Various federal and state regulators, self-regulatory organizations like the Financial Industry Regulatory Authority, Inc. (“FINRA”), and consumer protection organizations representing or advocating for investors, workers, and retirees have cautioned that investments in cryptocurrency-related assets present significant risks that warrant careful evaluation.”

Thus, according to the CFP Board, fiduciaries should exercise “extreme care” before including a crypto option to a workplace retirement plan such as a 401(k).

In any advice setting, including financial planning, CFPs are required to comply with the duty of care, duty of competence, duty to comply with the law and the duty to provide clients information about costs, as well as duties when selecting, recommending and using technology.

Essentially, the guidelines mean that for a CFP to provide advice on digital assets they need to be educated on those assets, their risks and how they might fit into a client’s broader financial picture.

Furthermore, the CFP must be able to monitor those investments and recommend technology and custody options with an understanding of those commensurate risks as well.

Furthermore, CFPs are required to at least have knowledge of held-away digital assets and the impact those assets may have on a client’s overall financial picture. CFPs should understand how those assets may impact the client’s “goals, liquidity, cash-flow, taxes and estate plans.”

“A CFP professional also must consider how cryptocurrency-related assets may require special considerations with respect to estate planning, such as a plan for the transfer of a private key if the Client passes away,” wrote the Board.

“These are only some of the ways that an investment in cryptocurrency-related assets may affect the Financial Planning recommendations.”

CFA Institute

According to the CFA Institute, three issues need to be resolved before crypto assets can be fully embraced by mainstream investors: valuation, fiduciary duty and the custody of assets.

“To puncture the hype, investors must think through what is actual, what is potential and what is merely aspirational,” said Stephen Deane, senior director, capital markets policy at the CFA Institute, in a statement.

“They should also distinguish between the underlying distributed ledger technology, which could well prove disruptive, and the business prospects for the thousands of individual crypto assets on the market today and more to come. We at CFA Institute firmly believe that there are no shortcuts to sound investing.”

The Institute’s Researchers Then Give Six Loose Guidelines For Fiduciaries And Institutional Investors:

* Proper analysis remains necessary for fiduciaries to comply with their duties of prudence, loyalty and care.

* With the inclusion of crypto, principles of portfolio construction still apply and investors should continue to take a holistic and strategic view towards portfolio construction.

* Fiduciaries are expected to analyze the value, volatility, correlation effects, momentum and/or technical features of any proposed investment.

* Intrinsic value of digital assets should be related to an in-depth, rational analysis of specific use cases.

* Investing in digital assets and related businesses requires a careful analysis of business model and client acquisition model.

* Fiduciaries need to ascertain the custody chain and safekeeping of client assets.

“The debacle at [crypto exchange] FTX shows the harm that can come to investors and platform participants when client assets are not kept safe,” said Olivier Fines, head of EMEA advocacy at the CFA Institute in a statement. “The example of FTX further underlines the importance of custody issues and the responsibility of investors to base their decisions on the investment case and not on hype and speculation.”

Advisors: Learn Bitcoin, or Your Clients Will

The disconnect between financial advisors and their clients around crypto has become increasingly apparent, given that 37% of advisors personally invested in crypto compared to up to 83% of their clients that may have, according to one 2023 survey.

The rise of cryptocurrencies over the past decade has been nothing short of remarkable, with bitcoin alone surpassing a market capitalization of over $1 trillion in 2021.

Yet, despite this surge in popularity, many financial advisors remain hesitant or even dismissive towards cryptocurrencies. This has created a growing disconnect between advisors and their clients who have invested in these digital assets.

The reasons for this disconnect are numerous. Some advisors are skeptical of cryptocurrencies, viewing them as a speculative bubble or simply failing to understand their underlying technology.

Others may be deterred by the lack of clear regulations or guidance from regulatory bodies. Whatever the reason, the result is the same: advisors are often ill-equipped to advise their clients who own crypto assets.

This disconnect can be especially problematic for clients who have invested heavily in cryptocurrencies without the guidance of a financial advisor. While some may have had tremendous success, others may be exposing themselves to unnecessary risks or missed opportunities.

As such, it is crucial for advisors to become more informed and engaged with the world of cryptocurrencies to better serve their clients and help them make informed investment decisions.

The Disconnect

The disconnect between financial advisors and their clients regarding cryptocurrencies has become increasingly apparent in recent years. The Bitwise/VettaFi 2023 Benchmark Survey of Financial Advisor Attitudes Toward Crypto Assets underscores this trend, revealing that only 37% of advisors admit to having personally invested in crypto, down 10% from 2022.

In contrast, the same survey revealed that financial advisors say that upwards of 83% of clients either have crypto or the advisor isn’t aware if they do.

Furthermore, a recent survey by Coinbase of over 2,000 Americans in February 2023 found that 76% of Americans believe that cryptocurrency and blockchain are the future, while 20% of all Americans currently own crypto.

Additionally, 67% of Americans think that the current financial system needs major changes or a complete overhaul. These statistics demonstrate the growing popularity and acceptance of cryptocurrencies among the general public.

Despite these trends, the Bitwise/VettaFi survey also showed that 76% of financial advisors in 2023 stated that they would definitely not or probably not invest their clients in crypto.

This highlights the need for financial advisors to become more informed and engaged with these assets to better serve their clients and help them make informed investment decisions.

As cryptocurrencies continue to gain mainstream acceptance and become more integrated into the financial landscape, advisors who remain disconnected from these assets may find themselves at a disadvantage.

It is crucial for financial advisors to take these surveys seriously and adapt to the changing landscape of the financial industry.

A Cautionary Tale

As a financial advisor, I met with a client in late 2016-2017 for our normal annual review. At that time, I wasn’t paying much attention to cryptocurrencies.

However, during this meeting, my close client surprised me with news about his situation. It turned out that in 2015, he had become interested in Bitcoin and began investing in it without mentioning it to me.

Over the next few years, he had snowballed a $500 investment into a bitcoin mining facility netting himself an asset of around $500,000 in equipment and coins. As his advisor, I was caught off guard when he asked me what he should do with it and had no idea how to handle the situation.

I realized then that if my client was exposed to potential estate, tax, security, liability and business issues, I had no idea how to help because I didn’t understand the technology that had just created this situation.

It was a wakeup call for me to take this emerging asset class more seriously and educate myself to better serve my clients. How could I be an advisor if I didn’t understand how to help?

Being an advisor isn’t about understanding only the things you agree with, but understanding how to help any of your clients through a multitude of situations. This experience taught me the importance of staying informed and educated about emerging investment opportunities.

Avoid The Mistake

There are a few ways that financial advisors can work to close the disconnect between them and their clients when it comes to cryptocurrencies and other emerging investment opportunities.

First, it is crucial for advisors to stay informed and educated about cryptocurrencies and their potential benefits and risks.

This can involve attending seminars and webinars, reading up on the latest news and developments in the industry, and engaging with other professionals who are knowledgeable about cryptocurrencies.

Second, advisors can proactively reach out to their clients and have open and honest conversations about their interest in these technologies. By understanding their clients’ interests and preferences, advisors can better tailor their recommendations and provide guidance on the best way to invest in cryptocurrencies.

Third, advisors can work to integrate cryptocurrencies into their overall investment strategies, in a way that is appropriate for each individual client. This can involve recommending specific cryptocurrencies or investment vehicles, as well as offering guidance on how to manage and store cryptocurrency assets securely.

Finally, advisors can partner with experts in the field of cryptocurrency and blockchain technology, such as attorneys, accountants and other financial professionals, to provide comprehensive and well-informed advice to their clients.

This can help ensure that clients have access to the full range of expertise and resources necessary to make informed investment decisions.

By taking these steps and closing the disconnect between themselves and their clients on cryptocurrencies and other emerging investment opportunities, financial advisors can position themselves as trusted and knowledgeable partners in their clients’ financial journeys.

Financial Advisors’ Next Value Proposition: Preparation For A Digital Asset Future

New technologies have changed the role advisors play for their clients. Now that discounts platforms, apps and algorithms have increasingly replaced their function as brokers and stock pickers, offering education on how to navigate the emerging financial landscape will be key.

“The Untouchables”, a film produced in 1987, contains a memorable and emotional scene in which agent Jim Malone, shot by Al Capone’s gang, lies dying. In his final moments, while spitting up blood, he shows Elliott Ness a paper with the train schedule for the mob’s bookkeeper and utters the famous phrase, “What are you prepared to do about it?”

I believe that financial advisors need to ask themselves, each other and their clients the same question now. We’re seeing upheaval in financial markets, uncertainty in banking, a war in Ukraine, protests, an Axis alliance of China and Russia with Iran and India, inflation and higher interest rates and the U.S. government trying to regulate crypto off American soil.

Most of us are tired of the bad news. Some of us complain about it to each other, as well as on Twitter or LinkedIn. Personally, I got caught up and complained as well – and then my astute wife asked me how we’re preparing. Funny, I hadn’t gone through that exercise yet. However, for financial advisors, this is exactly what clients will ask, and where you can provide the next wave of value.

The Value Waves

Financial professionals seem to always evolve their value proposition.

Their initial approach involved stock picking and brokering. But as algorithms eroded alpha opportunities, they shifted their focus to portfolio diversification.

Then, their focus turned to financial behaviors – helping clients determine how to save, how much to save and in what vehicles. More recently, we have seen a focus on providing more education to clients by producing and distributing more content.

Each of these value waves came with a technology that disrupted the financial advisor market by bringing the value directly to the retail investor.

Stock brokers were upset by online discount brokers and the emergence of robo-advisors and auto-rebalancing. And financial advisors were challenged by apps such as Mint and Acorns, which provide budget planning and tracking.

I think the next wave of value for advisors to provide to their clients is in preparation for the financial future.

“Well, duh, Adam. That’s the advisor’s job anyway,” you might say. However, the difference here is in my definitions of preparation and financial future.

The Past, Present And Future

For the past several decades much of the planning has been built around several constants, which made the ability to add and subtract tools with relative ease.

* The Dollar Is Far And Away The World Reserve Currency, And There Is No Close Second

* Ultra-Low Inflation

* Centralized Custodians Hold Our Financial Assets To Keep Them Safe

* We Can Trust Our Money At Banks

* Most Jobs Or Businesses Involve A Location, Or Several, Where We Work

In Only The Last Few Years We Have Seen These Constants Challenged By Several Factors, And I Think These Challenges Will Continue:

* Arbitrarily Low Interest Rates For 15 Years

* Covid-19

* Russia-Ukraine War

* … And All The Government Decisions That Went With These Events.

We have seen inflation growth at near-wartime rates. Interest rates had the fastest rise on record and caused banks to have negative equity, leading to bank runs and the need for the Federal Deposit Insurance Corporation and the Federal Reserve to promise deposit guarantees above the $250,000 FDIC standard.

We’ve lost more trust in our Western-style democracies, as evidenced in the U.S., France, Germany and Israel, because government officials (some elected, some appointed) have started making regulation and enforcement changes without due process.

This has included the closing and sanctioning of bank accounts, often through no or little fault of the account holder.

This All Leads To A Handful Of Questions About The Future:

* How Do We Prepare For A Future That Doesn’t Look Like The Last 30 Years?

* If The U.S. Dollar Isn’t As Dominant, Does Another Currency Take Its Place?

* Will Many People Feel More Comfortable Holding Their Own Assets Rather Than Having Them Housed In A Bank Or Other Custodian?

* Will We Look At Investment Options With Even Less Correlation To The U.S. Stock Market? Alternatives Like Real Estate, Art, Collectibles And, Dare I Say, Crypto?

* How Will Individual And Business Financial Models Change With Instant Settlement, Whether Via Crypto Or A Centralized Service Like Fednow?

Where Crypto Fits In

For years the people who discussed crypto were talking about financial and political occurrences that were more theoretical. However, in the past year, those theories have become realities – so maybe more people will start listening and taking crypto more seriously.

Several of the problems I’ve pointed to above could be solved partially or completely via crypto rails: an asset to act as an inflation hedge – bitcoin (BTC); a way to hold assets outside a bank – self-custody; a non-correlated asset class – crypto.

In addition, I can honestly say I understand the economy and financial system so much better as a result of my crypto study and knowledge. We have been spoon-fed our current financial system to the point that we don’t question much of it at all.

We just agree that it works. Learning crypto will help anyone gain a better understanding of the global financial system (and feel increased angst with such knowledge).

Advisors preparing themselves and their clients for the future will probably involve some advanced thought about the economy and capital markets – as well as an open mind.

It will involve geographic and custodial diversification – holding my assets in multiple jurisdictions (Switzerland) and technologies (wallets). The future financial plan will regularly include discussions of multiple income streams, as well as the possibility of living abroad for some time.

In the past, financial planning involved reducing investment risk in a portfolio. In the future, it will include reducing the risk of wealth disappearing in a bank run, government seizure and hyperinflationary period.

It will also include reducing the risk of getting caught in a crypto scam.

I don’t think crypto, DeFi, bitcoin and Web3 are the answer to everything. I do think the technology will be pervasive and will change the financial planning conversations, beyond simply whether to buy and hold bitcoin.

If you’re a financial professional, are you dismissing all the rapid and massive changes to the micro and macro economy and systems and assuming we go back to the world we knew a decade ago?

Or are you paying attention to the movements and preparing yourself and your clients for the world in which they might need to use their money?


Updated: 6-6-2023

Welcome To The NEW “Bitcoin For Advisors Newsletter”

Digital assets and crypto are rapidly changing the investing landscape. We’re here to help financial advisors find their way.


Ultimate Resource For Financial Advisers By Financial Advisers On Bitcoin

Crypto for Advisors is changing. I’m Sarah Morton, the new editor of this newsletter. Think of me as your tour guide on an ongoing journey through the evolving crypto ecosystem.

I’m here to curate timely, relevant and thought-provoking content as well as answer pressing questions that clients ask. But first:

Why Me?

My learning journey into the world of crypto started more than six years ago. I was drawn to blockchain technologies and the new opportunities driven by what we now call the new digital money (aka “crypto”) for the finance industry.

This journey led me to co-found MeetAmi Innovations, where we work daily with advisors, financial professionals and various digital asset community players to understand their challenges in answering client questions related to investing in crypto and digital assets.

You’re reading Crypto for Advisors, CoinDesk’s weekly newsletter that unpacks digital assets for financial advisors. Subscribe here to get it every Thursday.

There is no question that current and next-generation investors are interested in digital assets (cryptocurrencies, tokens, smart contracts, and other digital representations of value). Just yesterday, BlackRock CEO Larry Fink suggested: “Bitcoin could revolutionize finance.”

If he’s right, it would amplify demand from investors (recently surveyed by BCG) and their financial advisors for guidance on how to think about investing in this emerging asset class. And it’s not a simple answer.

Recent News Adds To The Complexity. In Just The Past Couple Of Months

* The Sec Has Sued High-Profile Crypto Exchanges Binance And Coinbase.

* A Bevy Of Financial Companies Applied For Bitcoin Spot ETFs In The U.S.

* Globally, The U.K. And Hong Kong Made Bold Moves Toward Becoming Digital Asset Financial Hubs.

A recent Coinbase study showed that over 50% of Fortune 100 companies have started crypto, blockchain and Web3 projects.

Such studies raise bigger questions like: How will these advancements affect digital assets? How will advisors navigate the complexities and rapidly changing nature of digital assets?

Advisors have a significant opportunity to support today’s clients and meet the needs of the next generation of investors – as long as they have a roadmap to navigate the digital-asset landscape.

This newsletter is here to help point the way. Each week Crypto for Advisors will share thought leadership from the industry, answer common and pressing questions from clients, and point to resources to better understand this rapidly evolving asset class.

If you have questions for our advisor network – or have topics you’d like to see covered – simply reply to this email, and we’ll try to answer them in future newsletters.

Thanks for subscribing – your readership means a lot to us.

Ask An Advisor

I educate financial advisors about digital assets. Here are the three most common questions they ask about digital asset investing.

– Adam Blumberg

Q: Is investing in digital assets secure? I’ve heard of people losing all their money?

A: It can be secure if you know how to hold the assets and do your homework regarding custody.

Digital assets and crypto are based on self-custody, meaning I hold my own assets in my own wallet(s).

However, we often use centralized custodians – such as an exchange – to hold assets for ourselves and clients, as they take on much of the technology’s heavy lifting. For both you and your clients, it’s important that you research the custodian to ensure they don’t commingle assets and are solvent.

Q: Do digital assets have real value?

A: Each crypto asset has its own value proposition and investment thesis. For example, bitcoin is often viewed as a hedge against inflation, government and banks. Ether is used to run applications on the Ethereum network. Other tokens derive their value from cash flows.

Advisors should understand some of the investment theses and value drivers of various crypto assets to properly evaluate them for client portfolios.

Q: What are the risks of investing in digital assets?

A: We’ve already talked a bit about custodial risk. Cryptocurrencies are also volatile, which poses allocation risks in client portfolios, especially with clients who may need liquidity. Many of the projects and protocols the tokens represent carry their own risks, which can be deeply technical and complicated to understand.

We don’t expect advisors to evaluate all the risks on their own, and we’re seeing more models and services which help determine crypto-asset risks as they relate to client portfolios.

Adam Blumberg is the co-founder of Interaxis, a company dedicated to educating financial professionals about digital assets.


Updated: 12-21-2023

Bitcoin For Advisors: The 2024 Year Ahead

Advisors now have a better – but still nascent – array of investment options to help avoid the pitfalls of early-adopter risk and exploit a generational opportunity in 2024.

2023 is winding down, and we saw a big year of cleanup within the cryptocurrency space and a lot of regulatory focus both in the U.S. and around the globe.

We are on the precipice of an exciting 2024 with a lot of news, activity and anticipation of spot bitcoin ETF approvals and potentially large influxes of capital into the space.

2024 Bitcoin Market Outlook For Advisors

Financial advisors and their clients should prepare for a potential transformative leap forward for the crypto asset class in 2024. Significant advances in market structure in 2023 and deep industry innovation in the new year indicate that rapid institutional adoption, meaningfully improved advisor investment accessibility and bullish catalysts for asset prices (not just bitcoin) may lie ahead.

Below, we provide a 2024 crypto outlook for investors seeking to diversify their overall asset mix and enact a thoughtful digital assets allocation plan.

2024 Bitcoin Market Outlook


When It Comes To Digital Assets, Advisors Should Ask Themselves The Following Two Questions: One, Why Crypto And Two Why Now?

Lengthier Answers Exist For Both, But The Simple Ones Are, Respectively:

1. Only a few of us have been around for the inception of a new asset class, particularly one uniquely powered by modern technology and in certain cases specifically programmed to combat the glut and frictions of traditional financial markets. Obtaining exposure to an alternative set of assets rooted in legitimate value – measurable by blockchain metrics – is a diversifying and generational opportunity.

2. The industry is transitioning from early adoption to mass adoption. A sea change in industry leadership, product development and fiduciary commitment swept crypto in 2023, enabling a new suite of increasingly institutional-grade on-ramps into the asset class.

Besides general industry trends, conspicuous catalysts in 2024 may also trigger rapid investor adoption of digital assets. These events include the potential (and seemingly likely) regulatory approval of Bitcoin and Ethereum spot ETFs, the Bitcoin halving scheduled for April 2024 (a once-every-four-years event that reduces the supply of new bitcoin), and a dovish macroeconomic backdrop and slowing inflationary environment – each on their own a meaningful bullish nod for crypto, but together a potentially rare opportunity for portfolio positioning.

Crypto ≠ Bitcoin

With context in place for crypto as part of an overall asset allocation mix, we turn to considerations within the asset class.

From a traditional allocator’s standpoint, crypto has a lopsidedness problem. Two megacap assets – bitcoin and ether – dominate 70% of the market capitalization for digital assets. Well-supported investment theses exist for both assets, but it is critical not to overlook the fundamental value of blockchain-powered technologies driving new business sectors like decentralized financial services and smart contract platforms.

As advisors progress on their crypto learning journey and position themselves for 2024, remaining open to the investment cases for other sectors is key. Just like crypto can be diversified to stocks and bonds, different crypto sectors can be diversified to each other (see Figures 1 and 2).

Diversifying crypto exposure to encompass a broad range of investable assets reduces single-token concentration and grows investor expertise in the asset class and its value.

Improved Market Structure

Moving from analysis to implementation, advisors should also consider the various methods of allocating to digital assets in the new year.

2023 marked a turning point for institutional readiness. Advances in qualified custody and new, thoughtful linkages between custodians and trading exchanges provide a more solid ground for advisors to plan their digital asset exposure.

Reporting, tax statements and ease-of-use are coming into view, with U.S. crypto custodians honing compliant RIA platforms to meet the needs of advisors.

The next wave of market innovation will likely come from asset managers competing on intelligent exposure to crypto markets as the product adoption cycle moves from basic passive exposure to sophisticated active exposure.

Perspective For Advisors In 2024

While multiple events point to potentially favorable conditions for crypto in the upcoming year, it is also critical to understand how crypto’s brief and volatile history has led to better, more durable options for investors.

Repeated industry failures in 2022 stigmatized the asset class, and mixed regulatory responses have blocked timely solutions by prominent traditional asset managers to help destigmatize it all, drawing focus away from the fundamental value of blockchain innovation and leaving investors scarred by fiduciary ignorance.

These events, however, have driven efforts by trained financial engineers, CFAs, and traditional asset managers to migrate legitimate investment solutions over from the traditional asset class world, with prominent “TradFi” figures now helming key crypto leadership positions at digital and traditional asset management companies. These efforts crystallized more strongly in 2023 and appear to be trending faster in this direction.

Supported by sturdier industry infrastructure informed by lessons learned, advisors now have a better – but still nascent – array of investment education, product options and platforms not only to help avoid the pitfalls of early-adopter risk, but to exploit early-adopter premia in 2024.

– Connor Farley, CEO, Truvius

Ask An Expert

Q. Crypto has become more mainstream and sought after as a new asset class. What are some of the ways investors can access this new and exciting frontier market?

A. Many people who look to invest in digital assets come from a traditional financial markets background and are often surprised by the complexity and fundamental differences between the two. Crypto is a nuanced and highly fragmented market, with hundreds of centralized exchanges globally. Yet only about 20 capture significant volumes, and then about five get most of the trades. The largest exchanges with the deepest liquidity are based outside of the U.S. At the same time, there are just three relevant exchanges based in the U.S. Additionally, there are decentralized exchanges (DEX), which are peer-to-peer marketplaces where trades occur on a chain directly between crypto traders. Centralized exchanges run internal ledgers that balance positions across their clients. There are over-the-counter (OTC) desks that provide more white glove service to institutional investors.

Q. Given this complexity, what is a good way for investors to gain access to crypto strategies?

A. Within the web of this fragmented market are multitudes of trading strategies that offer yield generation, arbitrage opportunity (as all frontier markets do) and superior proxies to the major currencies like BTC and ETH. One way to access these opportunities is to find fund structures that manage the investing, such as classic hedge fund structures or asset management firms that create institutional-grade products using digital assets. There are innovative managed accounts platforms that allow investors access to many of these strategies in a more transparent, secure and controlled environment.

– Leo Mindyuk, CEO, ML Tech


Updated: 1-26-2024

Bitcoin For Advisors: Opinion: Direct Bitcoin Ownership Is Best

In this week’s issue of Bitcoin for Advisors, learn why direct ownership of Bitcoin may be in the best interest of the client.

Christopher King, founder and CEO of Eaglebrook Advisors, shares his opinion on why direct ownership of crypto is the best path forward.

Our bitcoin ETF survey closed this week. Results are similar to the recently published NASDAQ survey that highlighted that over 70% of advisors hold crypto currently and would invest more for themselves upon approval of a bitcoin spot ETF; however, less than 10% feel comfortable advising their clients on this asset class. See the summary of results below.

Happy reading.

– S.M.’


Why Advisors Should Not Wait For The Spot Bitcoin ETF

While access to a bitcoin investment might be easier with a spot bitcoin ETF, Advisors could miss a significant opportunity if they wait for approval. Advisors with access to investment vehicles right now (Crypto SMAs) have the unique ability to “front run” larger institutions for maybe the first time in history, positioning clients to benefit from bitcoin’s historical four-year price cycle in a tightening bitcoin supply environment.

Cyclical Price Action Within A Secular Growth Trajectory

Bitcoin has followed a four-year cycle, with price reflecting the waxing and waning sentiment of an emerging innovation/asset class. Significant drawdowns have been followed by parabolic years of growth. These cycles demonstrated similarities in sentiment, price action and regularity.

As seen below, historically bitcoin has followed a pattern of three years of impressive gains followed by a significant drawdown in price. This cycle is driven by the natural changing of sentiment of an emerging asset and solidified by the underlying mechanics of bitcoin’s known code.

Every four years, the new supply of bitcoin entering the market is cut in half in an event known as the Bitcoin Halving. All else equal, this incremental reduction in the pace of bitcoin supply growth puts upward pressure on the price of bitcoin from a demand/supply balance standpoint and builds the narrative around the four-year cycle with media attention highlighting the critical characteristic of bitcoin’s fixed monetary policy.

Bitcoin was down 65% last year and is over 100% YTD in the first year of a potential new cycle, with the next halving slated for April 2024.

Ultimate Resource For Financial Advisers By Financial Advisers On Bitcoin

Strike Before The Iron Is Hot

With bitcoin at a favorable price relative to its historical four-year cycle and looming positive catalysts, advisors who have access to bitcoin should take this time to strike before the iron is hot, to get out in front of the institutional inflows and before the barriers to a bitcoin investment are lowered.

A spot bitcoin ETF approval and progress toward broader regulatory clarity around crypto could propel the next bull market, allowing latent demand to enter the market. By utilizing today’s available tools, such as Crypto SMAs, advisors can take advantage of the disconnect in the market between underlying demand and actual investment flows.

Further, bitcoin’s supply on exchanges is low by historical standards as investors in bitcoin are holding their bitcoin for longer and longer (41% of bitcoin supply has been held over three years compared to 27% in 2017), limiting the actual supply available to trade and increasing the price impact of any surge in bitcoin demand.

Ultimate Resource For Financial Advisers By Financial Advisers On Bitcoin

With technical and fundamental catalysts lining up for the next bitcoin bull run, advisors waiting for a U.S. spot bitcoin ETF may miss the boat. While a spot bitcoin ETF might help legitimize an allocation to bitcoin in the eyes of the broader investing public, there are more efficient investment vehicles to own bitcoin.

Direct Ownership Is The Way

Direct ownership is the best structure from an investment vehicle perspective and is available now. There is minimal tracking error compared to other products, such as an OTC public trust, which can have meaningful premiums and discounts and, thus, tracking error.

Further, there is 24/7 liquidity for crypto SMAs, allowing investors and advisers to sell or buy anytime.

The second and arguably more important reason is that direct ownership is in the clients’ best interest in the long term. An advisor who takes the time to position their clients in a favorable investment vehicle for a given asset class, even though it requires extra effort, will build a reputation for putting clients’ needs first.

Further, this will showcase domain expertise relative to advisors who are not knowledgeable about the crypto market.

A new asset class requires innovative infrastructure and education. The client will value the upfront work of advisors who utilize a Crypto SMA, increasing the trust in the relationship.

Slowly, Then Suddenly

Bitcoin will continue to take on the ups and downs of an emerging asset and deal with roadblocks in the form of bad actors, regulatory hurdles, misconceptions, and the volatility of an emerging innovation. To be sure, there will be more bumps ahead with volatile price movements and potential price drawdowns.

Further, a bitcoin ETF approval could be a “buy the rumor, sell the news” event.

We view bitcoin as not a trade but a generational opportunity with the upside materializing over a long-term investment horizon for three, five or 10 years. But that doesn’t mean advisors have the luxury to wait for a spot bitcoin ETF.

With arguably better investment vehicles available, a lining up of favorable tailwinds for bitcoin price, a potential deluge of new capital flowing to bitcoin, and a tightening supply of bitcoin, now is the time for advisors to make a prudently sized allocation to bitcoin, before the institutions for once.

– Christopher King, Founder & CEO, Eaglebrook Advisors

Bitcoin ETF Survey

During the past two weeks we asked advisors to partake in a survey focused on their investment interests for bitcoin spot ETFs. The results are in.

Slightly more than 50% of respondents stated YES, they would invest in a bitcoin spot ETF when approved in the US. 15% said NO; the remainder of respondents were based outside the U.S. Interestingly 82% said they would personally invest in a bitcoin spot ETF with the other 18% saying they would not.

When asked, “What would be the reason you would not allocate clients into a bitcoin spot ETF? (check all that apply),” 32% of respondents selected “lack of understanding and education,” 28% selected “inappropriate risk profile for your clients,” 17% selected “availability at your firm’s product shelf” and 28% selected “other” with write-in responses including “not suitable for clients aged over 65,” “prefer income-producing assets,” “inconsistent with investment mandate” and “BTC doesn’t offer the commercial utility of other alt coins.”

As 32% of respondents selected, “lack of understanding and education,” please note there are several courses and designations designed to help you learn and use digital assets. The CDAA and DACFP are two such designations.

Thank you to everyone who responded to the survey. Since the goal of this newsletter is to formulate an advisor community and dialogue, while the survey has concluded, we encourage you to reply back to this email with additional thoughts and topics of interest.

– Sarah Morton


Updated: 2-1-2024

A Financial Adviser’s Take On Spot Bitcoin ETFs

There are a growing number of questions around what’s fast becoming an ultra-competitive category.


The launch of the first-ever spot Bitcoin exchange-traded funds has dominated the ETF conversation over the last few months. Issuers are jockeying for position in what’s fast-becoming a successful and ultra-competitive category.

But who’s the target market for these products? What do advisers think of them? And how are they talking to their clients about them?

On this episode of Trillions, Joel Weber and Eric Balchunas speak with Douglas Boneparth, founder and president of Bone Fide Wealth. They discuss how he’s speaking with clients about Bitcoin, how he views the new ETFs, how much exposure to really consider and what they might displace in a portfolio. And then there’s how he thinks crypto compares with gold.


Updated: 2-8-2024

Bitcoin For Advisors: Bitcoin As A Building Block For Portfolios

A practical, unbiased, and proven approach could classify bitcoin as another building block in institutional investors’ portfolios.

Markus Thielen, CEO at 10x Research, spends his days researching digital assets and providing data-driven insights. I’m thrilled about his contribution to sharing a practical and unbiased approach to evaluating bitcoin allocation within a portfolio. Markus is the author of the book Crypto Titans: How trillions were made and billions lost in the cryptocurrency markets.

AJ Nary, head of HeightZero at BitGo, answers some questions that asset managers face when considering digital asset investments in the Ask an Expert section.

Institutional Investors Embrace Bitcoin, Sacrifice Traditional Assets

Investors have continued to push into alternatives to optimize their portfolio allocations. A practical, unbiased and proven approach could classify bitcoin as another building block in institutional investors’ portfolios.

When Bill Gates became friends with Warren Buffett, the latter convinced him to diversify his wealth away from Microsoft. Gates owned 45% of the company after the IPO in 1986. Microsoft has a $3 trillion market capitalization today, and Gates’s ownership is just 1.38%.

If he had held onto his original stake, his net worth would have been $1.35 trillion instead of $124 billion.

But not everybody is fortunate enough to have started one of the most valuable companies or can put all their eggs in one basket.

“Diversification is the only free lunch” available in financial markets, according to Nobel laureate Harry Markowitz.

Investing is often a function of the expected return and volatility of the assets in the investable universe to provide an optimal portfolio allocation. The result indicates the best allocation for a given expected return or volatility level.

Markowitz provided a practical method for selecting investments to maximize their overall returns within an acceptable level of risk, the so-called Modern Portfolio Theory (MPT). Fischer Black and Robert Litterman used the concepts of MPT and added investors’ views of expected returns.

While MPT only uses historical market data and assumes the same returns in the future, the Black-Litterman model lets investors apply their opinions to it and optimizes the recommended asset allocation.

Instead of a narrow “60/40 portfolio,” pension funds, endowments and registered investment advisors (RIAs) can work with their clients, use the $400 trillion investable market portfolio and optimize allocations based on their expected returns and risk tolerance (volatility).

The investable market portfolio includes equities, bonds and other fixed-income products such as loans, high-yield, municipal bonds, listed real estate (REITs) and alternatives, notably private equity and hedge funds.

Digital assets, as represented by bitcoin ETFs in secondary markets, account for a modest $1.6 trillion, but those bitcoin ETFs can diversify and optimize portfolio allocations further.

Ahead of other endowment funds, the late investor David Swensen standardized diversification through his Yale Model, which emphasizes diversification across various asset classes, focusing on alternative investments such as private equity, real estate, hedge funds and natural resources. Swensen revealed in 2018 that he had invested in two dedicated cryptocurrency funds.

Although he passed away in 2021, with the listing of bitcoin spot ETFs in 2024, Yale Endowment’s asset allocation portfolio would have likely added bitcoin ETFs under his guidance.

Many institutional investors ask themselves which role bitcoin could play in their portfolios. The answer depends on historical returns, acceptable risk and expected returns relative to other assets, as we learned from Black-Litterman.

We standardize non-liquid investments in real estate through REITs, hedge funds and private equity exposure through listed alternatives, such as the UK-listed Man Group or the share performance of Blackstone, which allows us to structure liquid portfolios based on the three characteristics: historical returns, acceptable risk and expected returns.

A typical asset allocation model suggests 19.1% exposure to equities, 16.8% to real estate, 44.8% to fixed income and 19.5% to alternatives. In contrast, bitcoin would only account for 0.58% within the alternatives bucket based on its market capitalization.

Exhibit: Asset Class suggestion based on Black-Litterman Asset Allocation model if Bitcoin outperforms Stocks (Bitcoin>VTI) by 10%, 20% or 30% during the next year with Portfolio Volatility Targets of 7%, 10% or 12%.

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Optimizing our Black-Litterman portfolio with a modest 7% volatility target, we notice that if our forward-looking assumption is that bitcoin outperforms the (US) Vanguard Total Stock Market Index (VTI) by +10% over the next year, then bitcoin’s allocation in institutional portfolios would increase from 0.58% to 1.61%. An outperformance of +20% or even +30% would warrant a bitcoin allocation of 3.27% and +4.32%, respectively.

Increasing our volatility target to 10% or even 12.5% suggests increasing bitcoin’s allocation towards a 10.36% to 10.58% portfolio-weighted position, depending on our bitcoin outperformance assumption.

A growing bitcoin outperformance assumption sees a reduction in fixed-income assets and an increase in alternatives and stock allocations.

A higher risk tolerance pushes the expected returns to the right side of the return distribution while allocating out of fixed income and embracing an increased allocation into alternatives, including bitcoin.

Unsustainable debt levels and inflation unpredictability have many investors rethinking their fixed-income risk tolerance. Bitcoin has become part of the legitimate investable universe through the ETF listings, and our Black-Litterman portfolio optimization shows that depending on investors’ portfolio volatility targets and return expectations, portfolios could allocate between 1.61% to 10.58% of their assets into Bitcoin.

Ultimate Resource For Financial Advisers By Financial Advisers On Bitcoin

Ask An Expert:

Q: What Should Asset Managers Consider As They Explore Adding Digital Assets?

A: The SEC’s approval of spot bitcoin ETFs in January has provided asset managers with a unique opportunity to begin introducing digital assets into their portfolios. As they work to create a disciplined approach to investing in digital assets, it would be wise to consider the following:

Direct vs. Indirect Exposure – weigh the benefits and limitations of holding Bitcoin directly or utilizing ETFs. Consider fee structures, liquidity, potential tax impacts and alignment with portfolio objectives, to start.

Diversification – analyze the impact of investing in one digital asset vs. multiple, on top of the overall impacts that digital assets will have to your existing strategy

Ongoing research and monitoring – develop a comprehensive framework to stay ahead of regulatory developments, market dynamics and emerging trends within the digital asset space.

External Education And Communication – proactively educate clients/investors about the benefits and challenges of digital assets while also managing their expectations

Q: What Role Do You Envision Broader Digital Assets Playing For Asset Managers Moving Forward?

A: The evolving digital asset landscape offers exciting possibilities for portfolio construction and diversification, spot bitcoin ETFs were just the beginning. There are other assets beyond bitcoin, such as ether or stablecoins, that may also have potential applications within investment strategies. Asset managers that want to get ahead of that may con12-21sider direct investment versus waiting for SEC approval of other ETFs. Bitcoin correlation between asset classes changes over time and could be a valuable complement to a portfolio’s other asset exposure.

Q: What Should Asset Managers Know About Direct Investing And What Should They Look For In A Digital Asset Partner/Platform?

A: A crucial aspect of direct investment is picking the right partner and platform that will ensure the safety and security of your digital assets. Asset managers should first and foremost look for a qualified custodian to hold their assets and mitigate risk. They should also ensure that there is a robust platform to help them seize market opportunities and adapt to market dynamics.

– AJ Nary, head of HeightZero @ BitGo, BitGo


Updated: 4-23-2024

Fidelity’s Bitcoin ETF Draws $40M In Largest Single Investment From Advisers (AUM $114.1 Trillion USD)!!!!

In 2022, the total AUM of SEC-registered investment advisors stood at 114.1 trillion U.S. dollars.

Financial advisers Legacy Wealth Management and United Capital Management of Kansas have each invested $20 million in shares of the Fidelity Wise Origin Bitcoin Fund (FBTC).

Fidelity’s Bitcoin exchange-traded fund (ETF) has achieved a new record as the largest single investment in a Bitcoin fund, attracting $40 million from two traditional United States financial advisers.

According to Bloomberg analyst Eric Balchunas, financial advisers Legacy Wealth Management and United Capital Management of Kansas have each recently invested $20 million in shares of the Fidelity Wise Origin Bitcoin Fund (FBTC), joining the fund’s top shareholders.

Legacy Wealth Management oversees more than $359 million in assets under management, while United Capital Management of Kansas manages over $436 million. The figures are part of recent 13F form filings submitted by asset managers to the U.S. Securities and Exchange Commission (SEC) for the first quarter of 2024.

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According to data from investment research firm Fintel, Bitcoin (BTC) represents 6% and 5% of the funds’ portfolios, respectively.

Bloomberg’s Balchunas believes the figures indicate a growing adoption among traditional investors. “This is as Boomer as it gets,” he noted on X in reference to United Capital Management of Kansas.

“Likely a wonderful sight for those hoping to see long-term adoption and an absolute nightmare for the RIA Skeptics Branch of the Underwhelmers Club,” he added.

However, the recent disclosures have prompted some to express concerns regarding the limited mainstream participation in BTC ETFs.

Jim Bianco, founder of macro research firm Bianco Research, described the first-quarter allocation data as a “disappointment.” “Unrealized gains are shrinking fast,” he added, referring to ETF investor gains versus current Bitcoin prices.

Fidelity’s BTC fund is the second-largest Bitcoin ETF in terms of assets under management, with over $10 billion at the time of writing, just behind BlackRock’s iShares Bitcoin Trust (IBIT), which holds more than $18 billion.

Despite newcomers and growing adoption among traditional investors, Bitcoin ETFs are experiencing a slowdown in demand. CryptoQuant CEO Ki Young Ju noted on X that the demand for BTC funds has stagnated since its peak in March.

On April 15, Bitcoin ETFs experienced net outflows of $36.7 million. According to Farside Investors, only Grayscale and BlackRock recorded positive flows on April 12 and April 15, while all other funds saw outflows.


Updated: 4-25-2024

Boomers To Pour $300B Into Bitcoin — Morgan Creek Capital

Morgan Creek Capital CEO Mark Yusko believes the full impact of Bitcoin ETF adoption has yet to be realized, as boomers will continue to gain more exposure to digital assets.

Morgan Creek Capital CEO Mark Yusko anticipates massive inflows into the Bitcoin as baby boomers’ wealth, estimated at trillions of dollars, seeks entry into digital assets.

During an interview with The Wolf Of All Streets podcast, Yusko discussed how the introduction of Bitcoin (BTC) exchange-traded funds (ETFs) and increased interest from registered investment advisers have led to a significant shift in demand.

Its Full Impact, However, Is Yet To Be Realized. According To Yusko:

“There’s going to be $300 billion, I believe — that’s 1% of $30 trillion — that comes into this space [within 12 months]. That’s actually more money than has ever [been] converted to Bitcoin in 15 years. That’s a pretty amazing thing.”

Yusko predicted capital flows are likely to come from baby boomers — those born between 1946 and 1964 — through retirement accounts managed by advisers. According to the Investment Adviser Association, U.S. financial advisers managed $114.1 trillion in assets in 2022.

“We’re a couple months, about three months into the ETFs, and we’ve gotten about 10% of what I believe is coming into this space from the registered investment advisers that control all the boomers’ cash,” Yusko stated, adding that the influx could potentially push the crypto market’s capitalization to $6 trillion.

“I’ve been saying that this is going to be the best Thanksgiving ever, right? No more ‘you’re not welcome because you’re a Bitcoin person in the family,’“ the executive commented regarding the expected increase in Americans’ social acceptance of cryptocurrencies.

Spot Bitcoin ETFs were approved by the United States Securities and Exchange Commission in January, 10 years after the Winklevoss twins’ first application.

Wall Street giants BlackRock, Fidelity and VanEck, among others, led the first batch of approvals. According to data from BitMEX Research, Bitcoin ETFs were worth a combined $53 billion as of April 24.


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Blockchain And AI Bond, Explained (#GotBitcoin?)

Grayscale Bitcoin Trust Outperformed Indexes In First Half Of 2019 (#GotBitcoin?)

XRP Is The Worst Performing Major Crypto Of 2019 (GotBitcoin?)

Bitcoin Back Near $12K As BTC Shorters Lose $44 Million In One Morning (#GotBitcoin?)

As Deutsche Bank Axes 18K Jobs, Bitcoin Offers A ‘Plan ฿”: VanEck Exec (#GotBitcoin?)

Argentina Drives Global LocalBitcoins Volume To Highest Since November (#GotBitcoin?)

‘I Would Buy’ Bitcoin If Growth Continues — Investment Legend Mobius (#GotBitcoin?)

Lawmakers Push For New Bitcoin Rules (#GotBitcoin?)

Facebook’s Libra Is Bad For African Americans (#GotBitcoin?)

Crypto Firm Charity Announces Alliance To Support Feminine Health (#GotBitcoin?)

Canadian Startup Wants To Upgrade Millions Of ATMs To Sell Bitcoin (#GotBitcoin?)

Trump Says US ‘Should Match’ China’s Money Printing Game (#GotBitcoin?)

Casa Launches Lightning Node Mobile App For Bitcoin Newbies (#GotBitcoin?)

Bitcoin Rally Fuels Market In Crypto Derivatives (#GotBitcoin?)

World’s First Zero-Fiat ‘Bitcoin Bond’ Now Available On Bloomberg Terminal (#GotBitcoin?)

Buying Bitcoin Has Been Profitable 98.2% Of The Days Since Creation (#GotBitcoin?)

Another Crypto Exchange Receives License For Crypto Futures

From ‘Ponzi’ To ‘We’re Working On It’ — BIS Chief Reverses Stance On Crypto (#GotBitcoin?)

These Are The Cities Googling ‘Bitcoin’ As Interest Hits 17-Month High (#GotBitcoin?)

Venezuelan Explains How Bitcoin Saves His Family (#GotBitcoin?)

Quantum Computing Vs. Blockchain: Impact On Cryptography

This Fund Is Riding Bitcoin To Top (#GotBitcoin?)

Bitcoin’s Surge Leaves Smaller Digital Currencies In The Dust (#GotBitcoin?)

Bitcoin Exchange Hits $1 Trillion In Trading Volume (#GotBitcoin?)

Bitcoin Breaks $200 Billion Market Cap For The First Time In 17 Months (#GotBitcoin?)

You Can Now Make State Tax Payments In Bitcoin (#GotBitcoin?)

Religious Organizations Make Ideal Places To Mine Bitcoin (#GotBitcoin?)

Goldman Sacs And JP Morgan Chase Finally Concede To Crypto-Currencies (#GotBitcoin?)

Bitcoin Heading For Fifth Month Of Gains Despite Price Correction (#GotBitcoin?)

Breez Reveals Lightning-Powered Bitcoin Payments App For IPhone (#GotBitcoin?)

Big Four Auditing Firm PwC Releases Cryptocurrency Auditing Software (#GotBitcoin?)

Amazon-Owned Twitch Quietly Brings Back Bitcoin Payments (#GotBitcoin?)

JPMorgan Will Pilot ‘JPM Coin’ Stablecoin By End Of 2019: Report (#GotBitcoin?)

Is There A Big Short In Bitcoin? (#GotBitcoin?)

Coinbase Hit With Outage As Bitcoin Price Drops $1.8K In 15 Minutes

Samourai Wallet Releases Privacy-Enhancing CoinJoin Feature (#GotBitcoin?)

There Are Now More Than 5,000 Bitcoin ATMs Around The World (#GotBitcoin?)

You Can Now Get Bitcoin Rewards When Booking At Hotels.Com (#GotBitcoin?)

North America’s Largest Solar Bitcoin Mining Farm Coming To California (#GotBitcoin?)

Bitcoin On Track For Best Second Quarter Price Gain On Record (#GotBitcoin?)

Bitcoin Hash Rate Climbs To New Record High Boosting Network Security (#GotBitcoin?)

Bitcoin Exceeds 1Million Active Addresses While Coinbase Custodies $1.3B In Assets

Why Bitcoin’s Price Suddenly Surged Back $5K (#GotBitcoin?)

Zebpay Becomes First Exchange To Add Lightning Payments For All Users (#GotBitcoin?)

Coinbase’s New Customer Incentive: Interest Payments, With A Crypto Twist (#GotBitcoin?)

The Best Bitcoin Debit (Cashback) Cards Of 2019 (#GotBitcoin?)

Real Estate Brokerages Now Accepting Bitcoin (#GotBitcoin?)

Ernst & Young Introduces Tax Tool For Reporting Cryptocurrencies (#GotBitcoin?)

Recession Is Looming, or Not. Here’s How To Know (#GotBitcoin?)

How Will Bitcoin Behave During A Recession? (#GotBitcoin?)

Many U.S. Financial Officers Think a Recession Will Hit Next Year (#GotBitcoin?)

Definite Signs of An Imminent Recession (#GotBitcoin?)

What A Recession Could Mean for Women’s Unemployment (#GotBitcoin?)

Investors Run Out of Options As Bitcoin, Stocks, Bonds, Oil Cave To Recession Fears (#GotBitcoin?)

Goldman Is Looking To Reduce “Marcus” Lending Goal On Credit (Recession) Caution (#GotBitcoin?)

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