Bitcoin still splits opinion, with some regarding it as a questionable asset while others insisting it points to the future and is a crucial portfolio diversifier. However, even the naysayers will have had their head turned by bitcoin's price surge since the election as it repeatedly hits record highs and nears the $100,000 milestone.
The cryptocurrency is enjoying significant tailwinds right now. As recently reported by Bloomberg, President-Elect Donald Trump’s team has already met with industry executives to discuss creating a White House job focused on cryptocurrency policy. And with SEC chair Gary Gensler, known for his aggressive stance on crypto markets stepping down on the same day of Trump’s inauguration, one can only speculate on how the asset will be regulated and what this means for the industry going forward.
"This is a big win for the industry as Gary Gensler’s regulation by enforcement stunted the industry’s growth for years," says Greg Benhaim, executive vice president of product at 3iQ, in an email. "There will be countless new bitcoin and digital asset financial instruments introduced to the market, reducing barriers to entry for investors and increasing liquidity."
Some advisors, however, remain highly skeptical of the current bitcoin euphoria.
“It’s not an investment; I’ll never recommend somebody invest in a currency. That, to me, is completely unnecessary,” says Andrew Evans, CEO of Rossby Financial, noting that there's still not enough utility around bitcoin for it to be something great long term.
“If a client is adamant, I’ll happily tell them to go someplace else and get it, like Robinhood or Tradeview. We can link it into your financial plan to show that you have it, but we are not buying it,” he added.
The only exception Evans will make is in purchasing an ETF basket of digital currencies “but that’s about it,” Evans asserts, noting financial advisors aren’t “currency traders.”
This is also Larry Sprung’s stance on the asset. He’ll purchase the bitcoin ETF rather than coins outright. “I think there are some protections there,” the founder and wealth advisor at Mitlin Financial, says.
He recalls a client who had around $100,000 in Bitcoin, who did some “incorrect things” from a cyber standpoint.
“Ultimately that $100,000 was stolen directly out of his wallet. There are inherently some risks with wallets remembering pass codes and things like that,” says Sprung. “We don't feel we're there yet, for bitcoin to be a core piece of everybody's portfolio.”
However, there are clients who have a longer time horizon and higher risk tolerance. For these clients, Sprung highlights they are taking small positions of bitcoin, around 5 percent, of an overall portfolio right now. Sprung also believes it’ll gradually move to become a more mainstream use of currency.
“I don’t believe bitcoin will completely replace traditional currency, but I think it may be there to kind of augment our current system and way of transacting business,” he says. “Will it be more mainstream in a year or two? I don't think so. It's going to take more time than that.”
Meanwhile, Tyrone Ross, CEO of 401 Financial and Turnqey Labs, whose been in the bitcoin space for 11 years, asserts that the currency has ushered in change in the industry and doesn't get enough credit.
“Even though I'm not a big fan of the ETFs, I think they help. Options like the ETFs help, because it gives advisors the easy button,” he says.
Ross believes the new Trump administration will help to be more crypto friendly, allowing for more conversation and to give advisors clarity on what is going on within the space.
“Who's the regulator of choice? Is it the SEC? Is it the CFTC? Is there joint guidance? We need to figure that out. I think advisors want that and the space wants that,” he added, also pointing to Schwab’s announcement of getting into spot bitcoin.
He asserts the industry needs more trusted, regulated names in the space, like “the Schwabs and the BlackRocks and Fidelity.” “If they get into the weeds, now you start to get all the things that advisors need, like qualified custody, statement generation, performance reporting, different account types, cash management options,” added Ross.
When asked whether investors should ride the bitcoin wave, Ross says, “long-term investors should absolutely ride this wave.”
“If you are a long-term investor, you absolutely ride this wave, because you know this train is going to make multiple stops, and I'm not getting off at $100,000,” he added. “Those of us that are hardcore believers and truly believe in the promise of the space, $100,000 is just one stop on the highway.”
At the end of the day, crypto in the U.S. is finally able to breathe, says Benhaim, and the reason is “thanks to this new found oxygen of a new administration.”
“Will there be dips along the way? Absolutely. However, we have finally entered true price discovery mode and the next 6 months is going to be a treat to watch unfold,” he says.
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