The Growing Adoption of Crypto Assets in Financial Advisory
The financial advisory landscape is on the cusp of a significant transformation regarding cryptocurrency investments, as highlighted by Bitwise Chief Investment Officer, Matt Hougan, on May 14. Following a major advisory firm’s conference, Hougan revealed that a “big unlock” is taking place: most major firms are expected to incorporate crypto exchange-traded products (ETPs) into their offerings by the end of 2025. This sentiment reflects a broader trend emerging in the financial advisory world, where the interest in crypto investments is intensifying. Hougan anticipates that the new standard for inflows into crypto ETPs will reach "many billions," indicating a growing acceptance of digital assets as viable investment options.
Crypto ETPs have gained traction since their introduction, particularly in the U.S. market. Data from Farside Investors shows that daily inflows for U.S.-traded crypto ETPs have exceeded $1 billion on multiple occasions in the past year. This surge in capital inflow signifies that investors are increasingly viewing these digital products as essential components of their portfolios. As traditional barriers to entry diminish, expectations for portfolio allocations are shifting, with Hougan stating that “5% is the new 1%.” This change represents a substantial departure from historical norms, as institutions become more comfortable with higher crypto weightings within diversified investment strategies.
Historically, asset managers have urged cautious crypto allocations due to concerns about volatility and risk concentration. In December, BlackRock’s Investment Institute defined a modest 1% to 2% Bitcoin allocation as a "reasonable range" for multi-asset portfolios. This recommendation has been operationalized in practice, with BlackRock incorporating Bitcoin into its $150 billion model portfolio through the iShares Bitcoin Trust (IBIT), which dedicates 1% to 2% of target allocations to Bitcoin. The recent launch of U.S. spot Bitcoin and Ethereum ETPs in 2024 serves to further establish regulatory-compliant exposure mechanisms, prompting financial advisors to reassess their crypto positioning for institutional clients.
As institutions explore these new products, the interest in Ethereum is surging alongside Bitcoin. Hougan noted a marked increase in advisor inquiries regarding Ethereum, stating that he received more questions about the asset in recent days than he had in the previous six months combined. While Bitcoin continues to dominate in terms of market scale, Ethereum is garnering substantial interest from financial professionals looking to balance their crypto portfolios.
Data from Bitwise reveals contrasting asset management figures among Bitcoin and Ethereum ETPs, with Bitcoin ETPs holding $93.2 billion in assets under management (AUM) as of December 2024, compared to Ethereum ETPs’ $6.3 billion. The distribution of ownership among these products also illustrates different investment preferences. In the Bitcoin ETP segment, hedge funds (36.97%) and investment advisors (33.11%) represent the lion’s share of institutional ownership. Conversely, Ethereum ETPs demonstrate more equitable exposure among investment advisors (29.79%), brokerages (25.25%), and hedge funds (24.74%), with family offices showing a strong preference for Ethereum.
Hougan’s insights underscore the evolving maturity of professional investment access to cryptocurrencies. As the availability of diverse crypto products expands and allocation norms trend upward, digital assets are poised to play a more institutionalized role in portfolio construction. The financial advisory sector is gradually recognizing the potential of cryptocurrencies, not just as speculative investments but as integral components of diversified strategies. This shift highlights the ongoing integration of blockchain technology into traditional finance, paving the way for a new era of investment opportunities in the digital age.
In conclusion, as the landscape of financial advisory evolves, investments in cryptocurrencies are expected to become more prevalent and normalized. With growing investor interest, enhanced product offerings, and changing allocation strategies, the future of crypto in investment portfolios looks promising. Professionals in the advisory world must adapt to this changing environment by embracing the opportunities presented by cryptocurrencies, ensuring that they remain competitive in a rapidly transforming financial market.
