50% spike in advisers allocating to cryptocurrency in 2020: Report

Although some advisers express skepticism about digital assets, fresh survey results show the percentage of advisers who report allocating cryptocurrency in client accounts rose nearly 50% last year.

While that increase is significant, the survey found that less than 10% of advisers are reporting allocations — meaning digital assets are still a drop in the bucket compared with other investment options, according to the survey conducted by Bitwise Asset Management and ETF Trends released Tuesday. 

Nearly 1,000 advisers answered a series of questions on cryptocurrencies and their use in client portfolios for the survey, which was conducted in December 2020. Respondents included independent registered investment advisers, broker-dealer representatives, financial planners and wirehouse representatives from across the U.S.

Notably, client interest in crypto rose in the past year, with 81% of surveyed advisers reporting that they had received a question from a client sometime in the past 12 months; this compares to 76% in the 2019 report. 

Yet, most advisers (83%) reported receiving questions from a small number of clients — fewer than 10%. Meanwhile, nearly three-quarters (74%) of surveyed advisers thought their clients were or could be investing outside of their adviser relationship. 

Of those advisers who are allocating to crypto, a majority (58%) are independent RIAs. That finding is not surprising, according to the study, given that RIAs face fewer restrictions in terms of what types of investments to include in client accounts when compared to other categories of advisers, and are often seeking to differentiate themselves with bespoke attention to client needs. 

By contrast, less than 1% of wirehouse representatives reported having an allocation to crypto in client accounts. 

The recent record-breaking rally of the popular digital asset Bitcoin has slowed, with prices set to finish this week just below $40,000, according to Bloomberg. Still, the cryptocurrency’s recent jump could attract more advisers and investors in 2021.

In fact, among advisers who are not currently allocating to crypto, 17% are considering allocating in 2021 for the first time.

In terms of price, advisers are optimistic, with 15% expecting the price of Bitcoin to exceed $100,000 within five years, up from just 4% in 2019. Meanwhile, the percentage expecting Bitcoin's price to fall to zero decreased sharply, from 8% in last year's survey to 4% this year.