Forecasting 2024: Crypto and Digital Assets for Advisors

• Spotlight on Bitcoin and Digital Assets in 2024
• Collaborative Input for Advisors
• Digital Assets 101 for Advisors
• 1. Defining Bitcoin
• 2. Understanding the Regulatory Landscape
• 3. Beyond Bitcoin
• 4. Classification and Vernacular
• 5. Implementation: Steps to Consider
• Conclusion
• Ask an Expert

Spotlight on Bitcoin and Digital Assets in 2024

As the end of 2023 saw an anticipated spike in Bitcoin$42,260 -0.64%'s value, due to the potential approval of spot Bitcoin Exchange-Traded Funds (ETFs) in the U.S., more financial advisors are considering this asset class. Do you have sufficient knowledge of direct ownership versus ETF ownership? The Crypto for Advisors newsletter is dedicated to providing relevant industry information to assist advisors in this asset class.

Collaborative Input for Advisors

In this edition, industry experts Kim Greenberg, Adam Blumberg, co-creator of the Certified Digital Asset Advisor, and DJ Windle from Windle Wealth have teamed up to provide a guide for starters. This guide aims to clarify the often confusing and misleading information prevalent in the field and kick-start your learning journey.

Digital Assets 101 for Advisors

Bitcoin and other digital assets have taken center stage due to potential U.S. spot bitcoin ETF approval and rising client interest. If you haven't started learning about crypto yet, here are five digital asset fundamentals:

1. Defining Bitcoin

The world's first decentralized cryptocurrency, Bitcoin (BTC), relies on blockchain technology for secure and verified transactions. The bitcoin protocol was designed to mint a total of 21 million coins. A unique feature of the Bitcoin software is the use of a coin creation method known as bitcoin halving." As the supply of new bitcoin entering circulation decreases gradually, the limited supply should theoretically support its value.

2. Understanding the Regulatory Landscape

Regulation towards bitcoin and digital assets varies greatly globally. Countries like the United Arab Emirates (UAE) foster a constructive attitude towards blockchain and cryptocurrencies. The European Union (EU) has implemented comprehensive regulations like the Markets in Crypto-Assets (MiCA) to safeguard consumer protection and financial stability. In contrast, the U.S. is characterized by its complex and slow regulatory progress, thus calling for clear and well-defined legislation.

3. Beyond Bitcoin

Bitcoin's idea of a decentralized network has given rise to additional blockchains and cryptocurrencies. The global cryptocurrency market cap today is $1.81 Trillion. Besides cryptocurrencies, other types of digital assets are emerging, including non-fungible tokens (NFTs), stablecoins, central bank digital currencies (CBDCs), digital bonds, and tokens.

4. Classification and Vernacular

Several institutions have attempted to classify digital assets similar to the MSCI GICS framework. Understanding and using a classification framework can facilitate portfolio attribution analysis and identify investment opportunities. Furthermore, grasping the crypto vernacular is crucial, and several firms have created glossaries to help understand the terminology.

5. Implementation: Steps to Consider

Emerging digital assets have become a necessity rather than a choice for financial professionals. Key steps to consider include continuous learning, client education, adherence to digital asset regulations, advising on investment options, and forming custodian partnerships.

Conclusion

Cryptocurrency ownership continues to rise, with regulations evolving and adoption growing worldwide. Institutions, asset owners, and asset managers are launching differentiated products, classification systems, broad-based benchmarks, and educational resources to further crypto adoption. There are multiple tools and resources to aid with understanding and practice management; it's just a matter of getting started.

Ask an Expert

The Crypto for Advisors newsletter aims to cultivate knowledge and business growth. Your comments, questions, and topic suggestions for 2024 are encouraged. If you wish to complete the Certified Digital Asset Advisor (CDAA) course, you may qualify for a free Pro Pass to Consensus, valued at $1,149. Visit the registration page for more information.

Edited by Jonathan Stoker