Financial pros mull allocation boosts to ‘chaos-resilient’ BTC: Bitwise

The macro environment and possible bitcoin ETF launches have some advisers looking to up BTC position to 5% or more, research analyst says

article-image

Thongden Studio/Shutterstock modified by Blockworks

share

Financial advisers are mulling a greater allocation to bitcoin in the face of an evolving macroeconomic environment and an expected shock to supply and demand of the asset, according to Bitwise executives.

Advisers interested in crypto have generally considered an allocation between 1% and 5% of a portfolio, Bitwise research analyst Ryan Rasmussen told Blockworks. It has historically been on the lower end of that range as equities and bonds offered appealing opportunities. 

But professional asset allocators are looking to hedge against risks of rising inflation, economic uncertainty and geopolitical conflict, he added — noting that more are viewing it as a “chaos-resilient” asset.

“Currently, there are limited appealing alternatives to gold, but bitcoin shares similar qualities while offering the opportunity for advisers to add some alpha to their client’s portfolios,” Rasmussen said. 

Loading Tweet..

Two-thirds of the “several” asset allocators Rasmussen chatted with — including independent financial pros and others part of large networks and registered investment advisers (RIAs) — are thinking about upping their current allocations to 5% or more, Rasmussen told Blockworks. Some are also considering jumping into the market for the first time. 

Bitcoin’s price was roughly $34,000 at 12:30 pm ET on Friday — up about 15% from seven days ago.

Larry Fink, CEO of asset management giant, said earlier this month there is “pent-up interest” in crypto. He noted he believes crypto will play a “flight to quality” role alongside US Treasurys and gold. 

Mike McGlone, a senior commodity strategist for Bloomberg Intelligence, said in an Oct. 25 research note that declining gold ETF holdings “may suggest room is being made for US-based spot bitcoin ETFs.” Bitcoin is still “quite risky” at 3.5 times the volatility of gold, he added.

Potential impact of possible BTC ETFs

Potential changes in certain adviser allocations to crypto comes after a January survey by VettaFi and Biwtise found that while 90% of various asset allocators get crypto-related questions from clients, just 15% allocate client assets to the space.  

Roughly a third of respondents said the launch of a spot bitcoin ETF would make them more comfortable allocating to crypto. 

Advisers are starting to realize the impact the potential launches of proposed spot bitcoin ETFs, as well as the upcoming decrease of per-block rewards for bitcoin miners, could have on the asset’s price, Rasmussen said. 

Bitwise, BlackRock and others are currently seeking approval for funds that would hold bitcoin directly — a type of product the US Securities and Exchange Commission has never permitted to start trading. But some have grown more optimistic of such launches in the coming months after Grayscale Investments’ court win against the SEC and apparent ongoing dialogue with issuers and the regulator. 

Read more: Is bitcoin’s ETF-fueled rally to $35K premature? Well, maybe

“Bitcoin is a commodity whose price is set by supply and demand,” Rasmussen said. “There’s going to be more demand next year when an ETF launches and the future supply is falling.”

An August Bitwise report stated that a 2.5% allocation to bitcoin would have boosted the three-year risk-adjusted return of a portfolio allocating 60% to stocks and 40% to bonds by 12 percentage points.

A 5% allocation can have a minimal impact on portfolio volatility and a significant impact on risk-adjusted returns, Rasmussen added.

“At the same time, a 5% allocation will not blow a portfolio up if crypto underperforms,” he said. “In other words, it’s all about position sizing relative to the opportunity, and advisers increasingly see bitcoin as a very compelling opportunity.”


Don’t miss the next big story – join our free daily newsletter.

Tags

Upcoming Events

Hilton Metropole | 225 Edgware Rd, London

Mon - Wed, March 18 - 20, 2024

Crypto’s premier institutional conference returns to London in March 2024. The DAS: London Experience: Attend expert-led panel discussions and fireside chats Hear the latest developments regarding the crypto and digital asset regulatory environment directly from policymakers and experts.

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Research report - cover graphics (1).jpg

Research

In this report, we dive into crypto private market data to gather insights on where the future of the industry is headed. Despite a notable downturn in private raises, capital continues to infuse promising projects that aim to transform payments, banking, consumer experiences, community, and more, with 2023 being the fourth-largest year for crypto venture capital.

article-image

BUZZ holds shares of Coinbase, Robinhood and MicroStrategy

article-image

Opinion: Even though I didn’t pay for my “Diamond Hands” burger with BTC, don’t let that fool you into thinking that crypto’s development is futile

article-image

The results mark “a major positive inflection point,” one analyst says, as the exchange carries net income momentum into a crypto rally

article-image

While the slate of 10 US spot bitcoin funds have tallied $4.6 billion of net inflows thus far, half of the field is lagging the leaders

article-image

Trading volumes totalled $154 billion in Q4, including $125 billion in institutional volume

article-image

DeFi on Bitcoin is all the rage right now and Stacks is positioned to benefit