Cryptocurrencies such as Bitcoin (BTC) are increasingly used by financial advisers as a hedge against inflation, underscoring the drastic shift in institutional sentiment towards digital assets.
The Bitwise / ETF Trends 2021 benchmark survey found that 9.4% of financial advisors allocate to cryptocurrencies in 2020, an increase of 49% from the previous year. Among advisers who are not currently allocating to crypto, 17% said they would “definitely” or “probably” gain exposure in 2021.
Advisors buy crypto for many reasons, the main one being its potential hedge against inflation. As Bitwise noted, 25% of advisers cited inflation hedging as one of the most attractive features of the asset class. This is an increase from just 9% the previous year.
The report said:
“This year’s survey saw a surge in the number of advisers highlighting crypto’s ‘potential high returns’ and its role in ‘inflation hedging’ as key attractive features of the asset class . “
A total of 994 councilors participated in the survey, up from 415 the previous year. Independent RIAs made up 45% of respondents, followed by independent brokers (25%), financial planners (19%), and wiring agency representatives (11%).
Bitcoin appears to be benefiting from the systemic devaluation of the dollar as more investors pull out of the traditional financial system. The dollar’s free fall is expected to continue this year as the new Biden administration prepares a multibillion-dollar stimulus package, effectively picking up where Donald Trump left off.
Although institutions currently represent a small fraction of all Bitcoin holdings, their impact on the market continues to grow. Goldman Sachs chief Jeff Currie believes institutional adoption has put Bitcoin on the path to maturity, but noted that increased adoption is needed to stabilize the asset class.
Bitwise’s assets under management soared to $ 500 million in December, five times more than two months earlier. The company’s record inflows reflect new demand from investment professionals, including advisers, hedge funds and corporations.