Bitcoin Rally Puts Advisors on High Alert

While it’s unclear whether the spike in bitcoin’s price is being driven by the increased likelihood that U.S. regulators will approve the first spot bitcoin exchange-traded fund, one thing is clear: Both topics are fueling an interest in cryptocurrencies among financial advisors and their clients.  

“We saw huge growth in crypto last year but also significant turmoil that shook many investors' faith,” said Michael Dinich, financial advisor and founder of Wealth of Geeks. 

“Now, as the market stabilizes and mainstream adoption continues, more people want to understand this emerging asset class,” he added. 

Bitcoin, the most well-known cryptocurrency, has gained nearly 25% over the past 30 days and is up more than 155% over the past 12 months, a rally that’s been increasingly gaining steam as deadlines approach for the Securities and Exchange Commission’s rulings on nearly a dozen filings seeking spot bitcoin ETF approval.    

Spot Bitcoin ETF Potential

For advisors like Dinich, this recent stunning performance sometimes means helping clients keep things in perspective.  

“The potential approval of a bitcoin ETF would make it much easier for average investors to gain exposure, enhancing crypto's appeal,” he said. “At the same time, I always counsel caution here because crypto remains a highly speculative and volatile market.” 

So far, ETF issuers have been allowed to offer only futures-based cryptocurrency exposure. But with a Jan. 10 SEC ruling deadline looming for the ArRKInvest spot bitcoin filing, market watchers are anticipating several of the ETFs being approved at the same time.  

“Ease of access, increased liquidity and more regulation will likely serve as catalysts for an even greater rise in the price and legitimacy of bitcoin,” said Nate Nead, chief executive of Invest.net.  

“The regulations and scrutiny from the fallout of FTX and Binance will not only serve to better define how to navigate bitcoin in a compliant way but will also serve to further legitimize its existence as a new asset class,” he added. “I can't recommend others invest in crypto, but my firm and I are making regular purchases as part of a diversified portfolio.”  

Nathan Jacobs, senior researcher at The Money Mongers, sees the increased attention on crypto continuing to feed on itself in driving performance.  

“Bitcoin is on a rollercoaster again, and everyone's eyes are on it, especially with the SEC possibly nodding yes to a bitcoin ETF,” he said. “It's not just crypto enthusiasts anymore—even the regular investor crowd is getting curious.” 

Crypto Skeptic 

Meanwhile, not everyone is ready to jump on the bandwagon. 

Robert Johnson, professor of finance in the Heider College of Business at Creighton University, sees the price momentum and worries that it could end badly for investors.  

“Unfortunately, I do believe that the recent rally in bitcoin, combined with the increased chance of the SEC approving a spot bitcoin ETF, is driving interest in crypto investing,” he said. “I say ‘unfortunately’ because my belief is that one cannot truly invest in bitcoin; one can only speculate.”  

Comparing bitcoin’s all-time high of more than $61,000 in November 2021 with the current price of nearly $44,000, Johnson said the phrase “Just Say No” should guide advisor communications with clients.  

“I can think of few worse strategies than committing investment to cryptocurrencies,” he added.  

Contact Jeff Benjamin at [email protected] and find him on X at @BenjiWriter