Often misunderstood, crypto has an important role to play in the alternatives sleeve of a portfolio.
As an asset class, crypto is inherently liquid, has low correlations to other asset classes, including stocks and bonds, and has both high volatility and high return potential.
“We’re investment professionals, we know what to do with low correlated liquid assets that are volatile and have high return potential. We can add them into portfolios in relatively small amounts and rebalance. Historically, that has significantly increased risk adjusted returns,” Bitwise Asset Management CIO Matt Hougan said during VettaFi’s Alternatives Symposium on November 28.
While 2023 has been a tough year for crypto as an asset class, industry experts have a positive outlook for next year. For starters, the SEC is poised to finally approve a spot bitcoin ETF. There are now a number of serious players entering the bitcoin ETF race, Dave LaValle, global head of ETFs at Grayscale, said during the symposium.
“There’s a tremendous amount of euphoria from investors and from the market as a whole about this product coming to market,” he said.
LaValle highlighted that this will be the first time investors will be able to access crypto in a regulated product as widely accepted as the ETF wrapper.
“I do think the spot Bitcoin ETF is going to be transformative to this asset class in the same way that [the SPDR Gold Shares (GLD)]was transformative to gold,” Hougan said.
Global Outlook: Crypto to Benefit From Political Tailwinds
From a global perspective, there are other tailwinds for the crypto space. Asia is reopening to the crypto market, and there has been enormous technological progress on blockchains like Ethereum.
“We are in a new multi-year crypto bull market in my opinion, and I think that’s going to strengthen in 2024 and 2025,” Hougan added.
LaValle has an equally rosy outlook for crypto. LaValle cited the upcoming bitcoin halving approaching in 2024 as something for investors to look forward to, as well as next year’s presidential election.
“Young voters are thinking about crypto; young voters are thinking about their investing future,” LaValle said. “We think that there has been a lot of bicameral and a lot of bipartisan support for crypto regulation over the past six to 12 months. We think that that’s going to be a big component of the election cycle and the election conversation. It’s going to be bringing more attention to the broadest range of investors, advisors, and the opportunity to educate those constituents is going to be front and center.”
Crypto is becoming harder to ignore, so advisors are going to need to have an opinion, Hougan said. It’s no longer a topic that can be overlooked with clients.
“I do think that’s very exciting,” he added. “So I commend advisors for studying crypto today. It’s going to be front page news in the coming months and years, and I’m really excited for the year ahead.”
Ways for Advisors to Get Crypto Exposure
Bitwise provides access to crypto equities and futures contracts with the Bitwise Crypto Industry Innovators ETF (BITQ), the Bitwise Bitcoin Strategy Optimum Roll ETF (BITC), the Bitwise Bitcoin and Ether Equal Weight Strategy ETF (BTOP), and the Bitwise Ethereum Strategy ETF (AETH).
Grayscale offers the Grayscale Bitcoin Trust (GBTC), allowing investors access to bitcoin through a traditional investment vehicle (not an ETF) traded on the OTC Markets Group.
For more news, information, and strategy, visit the Crypto Channel.