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Do Financial Advisors Recommend Investing in Bitcoin ETFs for Investors?

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How are financial advisors feeling about Bitcoin these days? In years past, many have expressed deep skepticism, citing price volatility, regulatory uncertainties, and even cryptocurrencies’ use in criminal activities. While plenty of doubts remain, the landscape has changed. In January, the Securities and Exchange Commission approved 11 spot Bitcoin ETFs. Two of the biggest, BlackRock’s iShares Bitcoin Trust and Fidelity’s Wise Origin Bitcoin Fund, are up more than 40% so far. So we thought it was time to check in again on advisors’ views of the asset and whether they’re recommending Bitcoin ETFs to clients. For this week’s Big Q, we asked: What do you think of Bitcoin now and are you recommending spot ETFs to clients?

Jeffrey Janson, senior wealth advisor, Summit Wealth Partners: I have been reaching out to clients proactively and asking if they want to take 10 minutes and talk about it. I don’t push it on them. We talk about position sizing and the volatility of the asset class. I would say 98% of my clients have said, let’s dip a toe in the water and get off zero and see what happens.

I definitely agree that it’s a speculative asset, but if you’re building portfolios, I don’t think having a small position in a speculative bucket is a problem. I actually think it’s beneficial for a well-balanced portfolio, especially if you’re going to rebalance periodically. I don’t know that there is one single solution to the allocation question. But when everybody is coming off zero, I’m actually thinking that 1% would be a good place to start.

I’ve had some clients say, let’s do 2% or 3% or 5%, and I’ve tried to talk them back from that level of allocation. I’ll tell them, let’s dip a toe in the water, let’s walk before we run. I want to prepare clients for the downside volatility when that inevitably comes. And I don’t want them to make the mistake of selling; I want them to add at that point. And then I’m also telling people that this is really a five-year hold.

Will McGough, director, investments, Prime Capital Investment Advisors: Advisors asking about Bitcoin ETFs based upon client questions that they field has gone from a drip to a trickle, and it’s definitely on my radar. Bitcoin has been a fun thing to talk about at cocktail parties for a long time, and it’s now easier for this conversation to be implemented than it was a few years ago.

I think the SEC approving spot Bitcoin ETFs is huge for Bitcoin, simply because it makes it a lot easier for financial advisors to access it through an ETF, versus having to get a digital wallet or use some app that’s away from their traditional custodian. Spot ETFs are obviously going to increase the attention and flow of assets toward Bitcoin, which could lead to higher prices.

I personally like Bitcoin, but you have to see it in context: It is a speculative asset. It’s got no fundamental value, it’s got no cash flows, it’s essentially digital gold. It’s going to take a long time for the institutional investment policy communities to be able to add Bitcoin as an asset class. I would think of Bitcoin kind of as house money. Whatever you put into it, don’t plan on that amount necessarily being there in the future, because it’s very volatile; it could go up or down 90% very quickly.

Mark Matson, president and CEO, Matson Money: I think it’s got no business in a prudent portfolio of anybody that has a purpose for their time, their energy, their money, their life, their retirement. It isn’t an investment. It’s pure speculation, for several reasons. Cryptocurrencies have an annual standard deviation over the past five years upward of 90%. So obviously it isn’t a real currency. There’s no “there” there: When you buy it, you’re not buying a company, you’re not buying human capital, you’re not buying intellectual property or capital. You don’t own a factory, you don’t own products. At least if you’d bought gold, which I also am against, you’d actually have a physical property.

These are random zeros and ones floating around in hyperspace that only have value because of what P.T. Barnum said, which is that there’s a sucker born every minute. So I just think cryptocurrencies and ETFs based on them are a terrible idea. Wrapping them up in an ETF doesn’t make it better. There are three types of cryptocurrency ETFs. There are ETFs that have actual coins in them. There are ones that are backed by futures. And there are ones that own stocks of companies that have a high exposure to Bitcoin currencies. All three of those types are flawed: They’re either stock-picking, market timing, or track-record investing, and all of those have been proven to be flawed methods of investing.

Paul Karger, managing partner, TwinFocus Capital Partners: We have been investing in crypto for the past decade. It isn’t widespread across our [ultrahigh-net-worth] client base—probably about 20% have exposure to it—and we don’t push it on clients if they don’t feel comfortable. I personally own it and have exposure to it. I think you need to have some kind of exposure; it’s just too big of an opportunity to ignore. I personally think you can you just own the Bitcoin itself. But obviously, it’s gotten much easier to own through ETFs.

We recommend 1% to 2%-type exposure. I do have certain clients who have 5% or 10% exposure and who are just complete Bitcoin fanatics. But that’s not for everybody. And I think […]

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