Wall Street veteran Ric Edelman announced his entry into the bitcoin market as an advisor on CNBC FastMoney on October 3rd. His RIA firm was rated number one in 2018 by Barrons and Edelman Financial Services manages over USD 22 Billion in assets. Edelman is quoted as saying that “every financial advisor needs to educate themselves about the space and should consider an allocation for clients.” According to Edelman, cryptocurrency is here to stay.
Ric Edelman bullish on bitcoin
Citing the reasons for being bullish on bitcoin, Edelman mentions the fact that it is now a 10-year-old asset with a proven track record and the crypto market is now over USD 200 Billion. These markets do not simply vanish, and the chances of bitcoin going to zero remain very near the zero figure. Additionally, the price of bitcoin has been relatively stable around the USD 6,000 to USD 7,000 mark. This consistency means that investors large and small can invest with less risk.
Edelman believes that cryptocurrencies are a distinct asset class like oil, gas and precious metals and that they are a store of value. He states that in future an allocation of 1-5% could be appropriate for a typical portfolio. An important distinction made by Edelman is that they are crypto assets and not cryptocurrencies. In other words, they are more closely linked to resources (oil, energy, gold) than they are to national currencies like the Japanese Yen or Swiss Franc. This distinction may not be clear-cut, and cryptos possess properties of both. He also raises the point that the crypto asset class is not correlated to other markets.
Advisors sorely lacking crypto knowledge
Ric Edelman also cited the lack of knowledge and awareness that investment advisors have concerning the cryptocurrency market in general. It is standard practice for advisors to steer their clients away from cryptocurrency. The main reason for this, as cited by Edelman, is that they do not know anything more about cryptocurrency that the clients they are supposed to be advising.
Additionally, there is no benefit for the advisor. The standard model is that advisors make a 1-2% profit regardless of whether the portfolio goes up or down. But investing in cryptocurrency generates additional regulatory and legal requirements for investment advisors without any kind of added return. In short, there is no incentive for them to adopt a model that generates more risk for them.
One of the main issues highlighted by Ric Edelman is that there is a lack of regulation and that its the “Wild West.” There is no way for investors to be sure of anything, with conflicting statements between Federal judges, the SEC, and the CFTC. There is also no definitive legislation on the regulatory status of cryptocurrencies. Because of this environment, Edelman says he cannot encourage his investors to buy the asset class. However, he does believe that –
“the day will come when the SEC creates or allows a Bitcoin ETF, and that will change everything.”
Digital Nomad with an interest in Zen and Blockchain technology.
Law graduate with 3 years experience as a consultant in the capital markets industry and 4 years experience freelancing on UpWork as a Creative Writer.