Grayscale was a proud sponsor of this year’s Bloomberg Wealth Summit. This event brings together leaders of wealth management firms and asset managers for a discussion about investment opportunities in 2022. Here are our four main takeaways from the event:
Crypto is top-of-mind for wealth managers in 2022.
Common macro concerns cited by speakers included the rising interest-rate environment and inflation in the U.S.; global geopolitical risks amid the Covid-19 pandemic and Ukraine-Russia conflict; and opportunities to invest in high-growth assets in light of lower anticipated returns in stocks and bonds, especially negative-yielding bonds. Crypto came up as an important element of the conversation about each of these concerns.
We are far beyond the stage at which bitcoin, blockchain technology, and NFTs are merely buzzwords. Whether as an inflation hedge or a direct response to lower anticipated returns in equities and fixed income, many financial advisors are looking toward digital currencies like Bitcoin for potential new sources of returns in the years ahead. For portfolio managers who avoid exposure to digital currency, their clients now expect them to explain how they arrived at that decision.
Individual investors are driving the conversation, and have been for some time.
A highlight of the event was when my colleague Craig Salm, Grayscale’s Chief Legal Officer, spoke on a panel with Former CFTC Chairman Timothy Massad and WilmerHale Partner Tiffany J. Smith. Craig asked the in-person audience to raise their hands if they owned Bitcoin. Over half of attendees did. Then he asked if any attendees who did not own Bitcoin would do so if a spot-based Bitcoin ETF were approved by the SEC, and got an even stronger response. You can get a sense of the reaction from the Youtube replay.
This ad hoc poll demonstrated something we’ve seen over time at Grayscale: not only do many individual investors already own digital currency in their diversified portfolios; but we believe they became comfortable with the asset class faster than most institutional asset managers. In light of the investor concerns cited earlier, retail investors seem particularly interested in digital currency in 2022. It’s easy to see why: assets like Bitcoin are public, available to retail investors, and have provided venture capital-like returns that historically were only available in private markets to accredited investors and institutions.
Regulated products would ease mainstream adoption and acceptance of crypto in traditional finance.
Many wealth managers are required to only hold investments with a certain regulatory status or risk profile in their portfolios. This is why the regulated investment vehicles offered at Grayscale – such as Grayscale Bitcoin Trust (OTCQX: GBTC) – have become widely used by wealth managers. This is also the reason we believe that digital currency index funds and spot-based ETFs are critical; their development will further mass adoption of digital currency investing for wealth managers, who want to provide their clients with secure access to digital currency through regulated and familiar investment vehicles.
Data backs this up. During his panel, my colleague Craig noted that over 800,000 investors own shares of Grayscale Bitcoin Trust (OTCQX: GBTC) and nearly 3,000 people have submitted public comments to the SEC regarding Grayscale’s Form 19b-4 to convert GBTC into an ETF. Furthermore, in a brand new NASDAQ poll, 72% of financial advisors said they would support a spot crypto ETF product in the U.S.
Clients are asking more sophisticated questions, and wealth managers are eager for education about crypto and digital assets.
This covers all aspects of the asset class, including the underlying blockchain technology, historical performance, regulation, access, and custody solutions, but a big topic seems to be the relationship between bitcoin mining and the environment.
For wealth managers looking for statistics to share with their clients, we find these to be helpful. First, Bitcoin uses less than 0.1% of human energy production worldwide. Second, globally, it is estimated that over 70% of bitcoin mining is from renewable resources. Third, approximately 73% of bitcoin mining is carbon neutral.
* Foundry Digital, 2021, The Environmental Impact of Bitcoin Mining: Separating Myth from Fact
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