While the crypto market’s volatile performance in recent weeks may give pause, recent declines should not discourage curious clients from allocating to digital assets, according to Ric Edelman.
Edelman, the founder of the Digital Assets Council of Financial Professionals, spoke with WealthManagement.com on the crypto outlook for clients at the Wealth Management EDGE conference, which took place this week in Hollywood, Florida. hated).
Earlier last month, Bitcoin fell to $26,000 from a previous high of over $60,000 (although it has since rebounded slightly in the low 30s), but Edelman pointed to Bitcoin’s long history of volatility. bitcoin and argued that if investors remained focused on the underlying technology and its adoption in the coming decade, it is easier to understand that we are still at the beginning of “the evolution of crypto”.
Moreover, the lower price also provides an attractive buying opportunity for investors who have held back so far.
“It’s a volatile asset class that’s always changing, and there’s still uncertainty about the future, and that’s why you should allocate low numbers to this asset class,” Edelman said. “You don’t need to allocate more than is prudent, but that doesn’t mean you have to do zero. If you do zero, you are 100% wrong.
During his town hall, Edelman offered five different approaches for crypto newbies (and advisors guiding those clients) to engage. In one possibility, he recommended buying Bitcoin only. Bitcoin is a trademark, the most proven coin and the coin that most institutions buy.
“If all of this explodes and falls to zero, Bitcoin will be the last man standing,” he said. “It’s the best known and your customers have heard of it, even if they don’t know what it is.”
Or customers may prefer to go only with Ethereum; many proponents claim the coin has a better business case than Bitcoin (it is the second largest coin and is widely adopted by businesses). Investors can opt for a combination of the two with a 50/50 or 60/40 split, allocating only 1-3% of assets for purchase. Additionally, clients can opt for the Bitwise 10 Crypto Asset Fund (BITW), which contains the top 10 digital assets by market cap, rebalanced monthly. Comparing it to an S&P 500 for the crypto space, Edelman said investors could use the crypto fund the same way they would use a mutual fund for portfolio diversification.
Often, Edelman said, advisors ask clients about aspects of their financial lives they don’t manage, from cash reserves to life insurance, annuities or rental properties, and he pointed out that advisors also need to ask about digital assets. According to him, too many advisors don’t, either because they don’t like crypto as an option or because they don’t know what or how to ask.
“And that is the fundamental error,” he said. “You need to be able to ask questions about digital assets the same way you ask about all the other things they own that are outside of your purview.”
Edelman’s views contrast sharply with those expressed earlier in the lecture by Noriel Roubini, a professor of economics at New York University’s Stern School of Business. He offered a decidedly more scathing view on cryptocurrencies, arguing that they do not serve as an effective hedge against inflation and that they are far too volatile, speculative and subject to manipulation.