What Advisors Think of New Spot Bitcoin ETFs
“Cryptocurrencies do not generate profits. Unlike traditional investments, there is no quantifiable value for cryptocurrencies. In our view, cryptocurrencies are very high risk, speculative assets that are best avoided,” Dugas added.
Terry Parham Jr., co-founder and financial planner at Innovative Wealth Building, seems to land somewhere in the middle.
“It’s all about moderation,” he said. ”If a person dedicates a large portion of their assets to traditional, time-tested strategies, then I believe it then grants them the ability to also invest money in new, exciting opportunities that have higher risk and potentially higher rewards.
“Whenever we plan around new topics, we tend to lean on what we already know. Conventional wisdom suggests not investing more than 5-10% of a person’s total portfolio into an individual stock. Further, a wise investor would also avoid being too heavily invested in one particular sector or one particular segment of the market,” he explained.
“To me, bitcoin, and cryptocurrency, is an interesting blend of individual security, technology and commodity. By viewing the investment opportunity through those three lenses, I think it’s possible to arrive at a sensible asset allocation that balances risk and potential reward. As a starting point, an allocation of 1-5% toward bitcoin might be a reasonable starting point for many investors,” Parham said.
Alex Lozano, founder and financial planner at Lozano Group Wealth Management, sees bitcoin and bitcoin ETFs as speculative instruments.
“Investment recommendations should come because the investment is deemed suitable to achieve the objectives of the client ‘goals’ such as retirement, education, legacy, gifting,” he said.
An SEC-approved bitcoin ETF “would be deemed a volatile and speculative investment in which only speculative investors should participate. I would not recommend investors to invest in such an ETF, unless they had the ability to lose their investment or hold it for long periods of time,” Lozano wrote.
Rich Siminou, principal and financial advisor at Siminou Wealth Management, has urged clients to invest directly in cryptocurrency.
“I advised my clients to open accounts on Coinbase to purchase bitcoin and ethereum directly to a comfortable amount they’re willing to sleep on. In terms of their portfolios, we’ve been investors in COIN (Coinbase Global Inc.) and MARA (Marathon Digital Holdings Inc.) mainly on swing trades and not allocating more than 1-2% of their portfolio,” Siminou said.
As for benefits of a bitcoin ETF, it “allows for different clientele to access the space,” he wrote. The cons are that “it may take away the performance of stocks like COIN and MARA, in addition to reducing the moment for owning crypto directly on Coinbase.”
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