“Buy me bitcoin… or I’m leaving.”
That’s the ultimatum a client gave to his financial adviser.
Naturally, this begs the question: What did the adviser do?
Now, you won’t read about this story in Barron’s, The Wall Street Journal, or Yahoo Finance.
It’s from personal experience. I’m a consultant for this adviser’s wealth management firm.
Every quarter, I meet at its South Florida office. We talk about the markets and review model portfolio performance. And I give them a handful of investment ideas.
And the firm’s CEO told me he bought the Grayscale Bitcoin Trust (GBTC) for his client.
GBTC allows everyday investors to gain exposure to bitcoin through a traditional investment vehicle.
Essentially, GBTC trades like a closed-end fund. It can trade at a discount or premium to its underlying value. And since its inception in May 2015, GBTC has traded at an average premium of about 30–40%.
So, on average, investors in GBTC have exposure to bitcoin at a big premium to its current price.
You might ask, “Why would anyone do that?”
The bottom line: convenience…
You Can’t Ignore This Asset Class
Being able to buy a bitcoin proxy, instantly, in your current brokerage account is attractive for individuals and advisers.
You don’t have to open an account on Coinbase, Kraken, or Robinhood. You don’t have to hold private keys. And you’re less likely to get hacked.
So, while I was shocked at the client’s threat, I wasn’t surprised by the solution.
Wall Street has woken up to Grayscale’s success. (GBTC has over $36 billion in assets. And it charges an annual fee of 2%.) And as you might have guessed, more investment firms are lining up at the door to make crypto available to their clients.
For example, in the last two months alone, Goldman Sachs announced it would offer crypto to private clients… Morgan Stanley filed to add bitcoin exposure in a dozen of its institutional funds… and JPMorgan stated it would launch its first bitcoin fund this summer.
You see, financial professionals can’t continue to ignore this asset class.
The last thing an adviser wants to do is lose a client. That would mean assets and fees out the door.
So, if a client has questions on crypto, advisers need to have answers. Ideally, they should also have available solutions like GBTC.
Otherwise, the client may go to another adviser who deals in crypto… do it on their own… or even go to their teenager for advice instead.
And as bitcoin prices continue to rise, demand will keep rising as well.
Fortunately for advisers today, there’s plenty to love about crypto…
One of the Best-Performing Assets
First, bitcoin has been one of the best-performing assets over the last 10 years. It’s outperformed all other asset classes – including stocks, gold, emerging markets, and more – by a long shot.
And second, cryptos are uncorrelated to the markets. In other words, their movements aren’t tied to the stock market or overall business cycle…
Correlated assets move together in price direction. For example, health care stocks generally move in the same direction as each other. They’re usually affected by the same events.
However, uncorrelated assets aren’t affected by these forces.
Now, there have been times when bitcoin has gotten clobbered along with the broader market, for instance during the pandemic-related market sell-off in March 2020. But here’s what Daily editor Teeka Tiwari said about this selling…
Bitcoin… [gets] sold to cover massive margin calls generated by stock market volatility. These sellers don’t want to sell… they have to sell.
And when you have to sell, you’ll accept any price the market gives you.
So, despite past crypto volatility that’s occurred during broader market dips, bitcoin still has ultra-low correlation to other asset classes… And Wall Street is finally catching on.
But it gets even better…
The Real Genius of Crypto
The best part is that just a tiny allocation to crypto can boost a portfolio’s return while also lowering its risk.
You see, a 2020 study by Galaxy Digital concluded that adding a small allocation to bitcoin increases a portfolio’s overall expected return and risk-adjusted returns.
And in the money management world, beating the market while limiting your risk is the holy grail. It’s also why it’s now more important than ever to diversify your portfolio with an allocation to bitcoin if you haven’t already…
It’s no longer a question of if this asset class will make its way into model portfolios run by financial advisers… It already has. And it seems inevitable it will be more widespread from here.
Now, bitcoin – and many other top cryptos – have a fixed supply. So as demand increases, it’s off to the races… Just like we’ve seen this year.
From its low in January to its recent high of $64,900, bitcoin has rocketed as much as 122% in just four months…
As more institutional adoption occurs, its demand and price should surge even more.
So if you’re looking to build your exposure to crypto, start with bitcoin…
The crypto has plenty of room to run before it hits our recommended buy-up-to price of $75,000. (We generally recommend an allocation of up to 10% for bitcoin.)
Remember, even a small bitcoin allocation can make a difference. Cryptos offer you a chance to make asymmetric bets for life-changing returns while also boosting your overall portfolio performance…
So you only need to invest a tiny stake to begin moving the needle on your net worth.
Analyst, Palm Beach Daily
P.S. While institutional interest and investments like GBTC can push bitcoin prices higher, some of the biggest crypto gains have occurred during what’s known as a “halving”… where a crypto’s new supply is cut in half.
And if you missed bitcoin’s halving in 2016… when Teeka’s subscribers saw gains as high as 14,619% and 26,977%… or bitcoin’s halving in 2020… when his picks soared as high as 2,950% and 5,121%… there’s good news…
There’s an even bigger event on the horizon. It’s what Teeka calls the “Super Halving,” and his research suggests it will skyrocket the price of a handful of little-known investments…
The “Super Halving” is too big to get into here, but this Wednesday at 8 p.m. ET., Teeka will share all the details… including how to access six crypto-related investments he’s never discussed before. Click here to learn more.