Cryptocurrencies like Bitcoin (BTC) are increasingly being used by financial advisers as a hedge against inflation, underscoring the dramatic shift in institutional sentiment toward digital assets.
The "Bitwise/ETF Trends 2021 Benchmark Survey" reveals that 9.4% of financial advisers were allocating to cryptocurrencies in 2020 — an increase of 49% from the previous year. Of the advisers not currently allocating to crypto, 17% said they will either “definitely” or “probably” gain exposure in 2021.
Advisers are buying crypto for many reasons, chief among them 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. That’s up from just 9% the year before.
The report said:
“This year’s survey saw a sharp uptick in advisors highlighting crypto’s 'high potential returns' and its role in 'inflation hedging' as key attractive features of the asset class.”
A total of 994 advisers participated in the survey, up from 415 the year before. Independent registered investment advisers represented 45% of respondents, followed by independent broker-dealers (25%), financial planners (19%) and wirehouse reps (11%).
Bitcoin appears to be benefiting from the systemic devaluation of the dollar as more investors opt out of the traditional financial system. The dollar’s freefall is expected to continue this year as the incoming administration of Joe Biden preps a multitrillion-dollar stimulus plan, effectively picking up where Donald Trump left off.
Although institutions currently represent a small fraction of all Bitcoin holdings, their impact on the market is growing. Goldman Sachs executive Jeff Currie believes institutional uptake has put Bitcoin on the path to maturity but noted that more adoption is needed to stabilize the asset class.
Bitwise’s assets under management ballooned to $500 million in December 2020, a fivefold increase from just two months prior. The firm’s record inflows reflect new demand from investment professionals, including advisers, hedge funds and corporations.