Trending
By a comfortable margin, bitcoin is one of 2024’s best-performing assets and thanks to the debut of spot bitcoin exchange traded funds in January, the largest digital currency has gained more mainstream acceptance. Advisors are part of that trend.
So much so that nearly all of the spot bitcoin ETFs that launched earlier this year are among 2024’s top asset-gathering funds. Even with those superlatives and bitcoin’s rising investment and ease of access offered by ETFs, data indicate plenty of market participants remain leery of cryptocurrency as an asset class.
On some levels, that apprehension is warranted. There are 9,920 digital coins on the market today, according to Coinmarketcap.com. Drift too far beyond the top 30 or so by market value and the landscape starts to look a lot like the penny stock universe – one populated by assets with sub-$1 or tenths of a cent price tags.
Additionally, the further down the list of digital currencies an investor goes, the harder it is to find credible use cases or valid arguments for stores of value. Hey, dogecoin – a memecoin – is still the eighth-largest cryptocurrency by market capitalization. Make of that what you will, but it’s probably not an endorsement.
Crypto Education Matters
For advisors, it’s a balancing act because crypto isn’t an asset class, but data confirm plenty of clients are interested in it. Education is helpful on this front because there’s a reasonable chance that while nearly all clients have at least heard of bitcoin, plenty have also heard about fly-by-night memecoins.
“Roughly six-in-ten Americans (63%) say they have little to no confidence that current ways to invest in, trade or use cryptocurrencies are reliable and safe. This includes three-in-ten adults who say they are not at all confident, and a third who say they are not very confident,” according to Pew Research.
Diving deeper into the above paragraph, the lack of confidence is mostly born out not knowing how to access crypto in safe fashion or folks are intimidated by crypto technology. They’re not necessarily saying they don’t believe in the validity of the asset class. Not surprisingly, older market participants are most likely to admit they have shortcomings in the crypto confidence department. That’s not necessarily a bad thing because a 65-year-old client that’s eyeballing retirement shouldn’t be too crypto-enthused.
“Some groups of Americans are more concerned than others about cryptocurrency. For instance, adults ages 50 and older are more likely than younger adults to say they are not very or not at all confident in its reliability and safety (71% vs. 55%),” add s Pew.
Room for Crypto Growth, But There’s a ‘But’
Undoubtedly, there’s room for growth in the world of digital currencies. As of this writing late Wednesday, bitcoin sports a market cap of $1.48 trillion, but just two others – ether and tether – have market values in excess of $100 billion.
The cryptos in the 10th through 20th sports are basically mid-cap stocks in terms of size. All of that implies avenue for growth, but there is a cautionary tale. Despite bitcoin’s rally and the surges of other tokens, the percentage of retail participants in the market has been stagnant for several years.
“Overall, 17% of U.S. adults say they have ever invested in, traded or used a cryptocurrency. This share is statistically unchanged since 2021,” observes Pew.
Perhaps ETFs and more education will improve that percentage over time.