Crypto ETFs Can’t Lure Some Advisors, Despite Huge Gains

Strong performance in 2023 for crypto, blockchain strategies forces financial advisors to reconsider their reluctance.

While the SEC ponders the raft of filings for the first spot bitcoin ETF, investors are driving crypto and blockchain funds to new powerful highs this year. 

The top 10 performers range from a 75% gain by the Blockchain Invesco Alerian Galaxy Blockchain Users and Decentralized Commerce ETF (BLKC) to a 208% gain by the Valkyrie Bitcoin Miners ETF (WGMI). 

The rally in crypto ETFs and blockchain ETFs is in line with the price of bitcoin, which is hovering around $29,000 and is up 77% from the start of the year, but still down more than 50% from a November 2021 peak of more than $65,000. 

Stacked up against a 17.5% gain by the S&P 500 index over the same period, the crypto affiliated strategies could look like an opportunity to chase some performance, but financial advisors are still generally not biting. 

The strong category performance has yet to impress Michael Hansen, co-founder and managing partner at Frontier Wealth Strategies. 

Demand for Crypto ETFs 

“If a client asks me about investing in a bitcoin ETF, I would go to great lengths educating them about not investing in a pyramid scheme and that the government is coming after these schemes,” he said. “If they still insist on doing so, I will ask them to do it outside my practice.” 

Kenneth Nuttall, chief investment officer at BlackDiamond Wealth, is also brushing off the potential of crypto investing, saying his clients are not pushing him in that direction. 

“I have not really had any clients ask about bitcoin or crypto since late last year, even though bitcoin has basically doubled,” he explained. “I think many advisors will be more hesitant after all the shenanigans last year with the likes of Celsius Network and FTX. I still think there will be demand but nowhere close to what it would have been if they were allowed to launch in 2020 or 2021.” 

Eric Roberge, founder and chief executive of Beyond Your Hammock, said he also prefers the slow and steady approach to investing over any attempt at swinging for the fences. 

“We don't think we're at a point where adjusting our investment thesis to allow for specific ETFs exposed to the crypto industry makes sense,” he said. “We build long-term strategies with solid exposure to the core global stock market, and that means we should capture the relevant companies as they enter the public markets. We don't believe we have to hit home runs and aren't trying to chase returns.” 

Contact Jeff Benjamin at [email protected]