Bitwise Asset Management is a cryptocurrency asset advisory and management firm partnered with Morgan Creek Digital, another digital asset-focused investment manager. Bitwise recently made headlines when it withdrew its Bitcoin exchange-traded fund (ETF) proposal, sending a note to the U.S. SEC claiming that the move was in lieu of public interest and protection of user funds.
Bitwise had filed the proposal in January 2019, and in response the SEC had raised several questions which the firm is working on thoroughly answering. For now, the withdrawal was a procedural step by Bitwise as they have intentions to refile their application at a future date that is yet to be disclosed.
In 2019, Bitwise had promised to stay committed to the security of investors’ funds and provide the ability to access the Bitcoin fund in a regulated and familiar format. Bitwise is not the only exchange, there are a few others, however none have received the proposal yet and the SEC still has market manipulation concerns.
In December 2019, Bitwise conducted a survey and reached out to more than 400 financial advisors, asking them a series of questions on cryptocurrencies and their use in client portfolios. Below are some of the key findings.
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Advisors are increasingly allocating to crypto: The percentage of advisors allocating to crypto in client portfolios is expected to increase 2 times and hit 13 percent
Advisors are attracted by crypto’s uncorrelated returns: Unlike traditional financial assets, cryptocurrency returns are uncorrelated and that attracts advisors to this.
The number of clients interested in cryptocurrencies has increased and almost 76% of financial advisors have reported receiving questions from clients.
Advisors are increasingly optimistic about Bitcoin’s price: 64% of advisors expect the price of Bitcoin to appreciate over the next five years, up from 55% of advisors in last year’s survey.
With survey findings we conclude that cryptocurrencies are a top investment choice for clients of 75% advisors. It clearly indicates a growing interest in crypto from advisors and investors alike.
These survey findings are like a benchmark for the industry as Bitwise Asset Management is the leading provider of index and beta funds and it manages multiple funds serving high net worth individuals, financial advisors, family offices, multifamily offices, investment managers, and institutions.
Bitwise’s team combines expertise in technology with decades of experience and they are backed by leading institutional investors. We will discuss their Jan 2020 report here, to test the current status of the cryptocurrency market and learn the details.
In their Jan 2020 letter to investors, the firm has discussed the success of Apple and celebrated Apple’s successful decade. The focus is on how Apple toppled market players that claimed to have a bigger share, massive resources, market capitalization and entrenchment.
The report establishes the fact that the groundwork for innovation in the cryptocurrency market is being laid currently and the ’20s are going to be the decade that crypto arrives into the mainstream. Currently the system requirement for cryptocurrencies (computational and otherwise) aren’t met and the stage isn’t set.
When Bitcoin was introduced in 2009, there was no escrow, no mobile wallets, 2FA, hardware wallets or cryptocurrency exchange. The entire infrastructure was built while other assets emerged and this is the groundwork that we are talking about here.
Over the past two years, several exchanges, custodians and wallet providers have come forward with solutions for crypto assets and they continue to tow the road to utility. Several family offices have shown interest in cryptocurrencies, in hopes of gaining the first mover advantage.
Regulators have fully engaged with the industry and investor interest is at its peak, after the 2017 crash. Cryptocurrencies inflated, they were criticized, analyzed critically, discussed and debated in the media and Congress and several government institutions across the world.
Cryptocurrencies have proven that they are not tulips and not a bubble but rather an innovation in the financial industry. While this validation in itself is not sufficient, crypto isn’t yet mainstream. However, this is enough of a breakthrough for wider acceptance and adoption.
Through the study of the current scenario, we highlight four widely anticipated secular trends that are poised to bear out and spur the next wave of adoption:
Adoption by Millenials: By 2030, there will be more prime income-earning-age millennials than baby boomers or Gen Xers and they will be leading almost all top institutions. This may tilt the scales in favor of cryptocurrencies, as millennials are said to be taking to cryptocurrencies faster than predicted.
Rise of a key player in the East: China At current rates, China’s GDP and technological advancement is sure to bring it at par with the west and this will increase its participation and contribution in matters of international importance – like finances, trade and regulations.
Privacy will become KEY: In 2019, in parallel to innovation, focus was put on security. Security breaches and hacks on major institutions and exchanges highlighted the need of a more robust and sophisticated security infrastructure. Privacy has been added to the tech stack and this is where we expect the next big breakthrough.
More interest on holding crypto: In 2019, staking and lending gained popularity among other ways of generating income from cryptocurrencies. Currently, no fiat currency helps users earn as much interest as some staking and lending schemes on crypto exchanges.
The letter discusses other investor concerns amidst the U.S. – Iran crisis and the new trade agreement between U.S. – China. Brexit, U.S. – China trade crisis and rising tension in the Middle East have had an impact on cryptocurrency prices. In events of geopolitical crises, Bitcoin’s response has been a short-term increase in prices. We look forward to appreciation in the price as the halving approaches and we’ll share updates here after the February 2020 letter is released.
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