Crypto's Next Frontier: Winning Over Financial Advisers

Crypto ready for next phase of adoption: Winning over financial advisers

Cryptocurrencies are poised for their next phase of adoption, with registered investment advisers (RIAs) emerging as the gatekeepers to a broader market. Despite the soaring valuations and the launch of spot Bitcoin (BTC) and Ether (ETH) exchange-traded funds (ETFs) in the United States, crypto has yet to reach beyond its core investor base. To enlarge its market, crypto must win over RIAs, who manage everyday investors' portfolios.

In the US, ETFs represent a $9 trillion market, with RIAs driving between 30% and 50% of those flows. However, RIAs are currently hesitant to adopt crypto due to market volatility and regulatory ambiguity. Only 2.6% of RIAs are actively recommending crypto to clients, and up to 55% have no plans to discuss or use crypto investments in the future.

Crypto ETFs are changing attitudes among RIAs, with around a quarter of them now exploring crypto following client requests, and another nearly 18% expecting to do so soon. Issuers are hoping to see crypto ETFs comprise 5% or more of RIA's client portfolios in the future.

Several catalysts could drive growth in RIA allocations to crypto. Wirehouses, which collectively manage around $1.2 trillion in investor funds, are exploring adding BTC to portfolio models. When that happens, RIA allocations to BTC could more than double. Additionally, adding staking to Ethereum ETFs could drive adoption, as staked ETH generates network fees.

Ultimately, adoption hinges on legitimacy and trust, which crypto is finally earning among RIAs thanks to the launch of ETFs. The availability of digital assets in the ETF wrapper is a game changer for financial advisers who are fielding client demand, and the ability to access these investments through regular investment channels will likely lead to greater adoption over time.