A survey published by Bitwise found that 10% of financial advisors have purchased crypto for their clients, and 24% said they own crypto personally. Crypto adoption by financial advisors has increased 50% in the past year.
One-quarter of survey participants described "inflation hedge" as crypto’s most-attractive utility, up 9% the previous year. Demand from clients also appears significant, with 81% of advisers reporting that clients have specifically mentioned bitcoin or cryptocurrencies in 2020, says Cointelegraph.
One of the holy grails in alternative investment strategies is finding uncorrelated assets. Having low statistical correlation to other assets is important for proper portfolio diversification as a financial advisor and to help control for volatility and establish boundaries for customer risk profiles.
Based on a report published in October by Fidelity Digital Assets, Bitcoin had almost no correlation to other assets between 2015 and 2020. Fidelity has praised Bitcoin as a low-fee, millennial-friendly alternative to gold, fueled by tech-forward trading apps like Robinhood which have accelerated adoption of crypto. The report finds that global investor sentiment obviously had an impact on bitcoin’s price over the time period, as well as sudden demand shocks such as lockdowns and unemployment that immediately impact cash flow.
Monetary policy decisions by the U.S. Federal Reserve and other central banks also had strong correlation to bitcoin's price—similar to nearly all equities, fixed income, commodities, and currencies. Cryptocurrencies represent a drop in the bucket compared with markets it could disrupt, such as the $13.4 trillion market of alternative investments. Crypto is fundamentally less exposed to the economic headwinds that other assets will likely face, and the opportunity cost of having 0% bitcoin allocation is high.
Fidelity makes a strong bull case for more institutional investors to buy Bitcoin, as evidenced by their launch of the Fidelity Bitcoin Index Fund in August. Fidelity cites incremental benefits of Bitcoin as having higher liquidity (24/7 trading), higher accessibility, lower fees, and lower correlation.
The report suggests a portfolio with 5% target allocation to bitcoin as being reasonable in today's market. It says crypto is still too small in terms of market size and trading volume to be considered it's own asset class, but says its still a "unique investable asset" and has "compelling differences" relative to traditional asset classes." Read the full report by Fidelity here.