By Lawrence C. Strauss

Chad Warmbein, a financial advisor with Park Avenue Investment Advisory in Pittsburgh, recalls that crypto wasn't an option for his clients five years ago. "It was too risky of an asset to work in the portfolio," he says. Today, however, crypto is an important part of his toolbox: "We are using the crypto ETFs in our client accounts," he says.

Across the world of wealth management, crypto is starting to become a bigger part of the conversation, even if it isn't widely adopted amid concerns about transparency, volatility, and valuation methods. In some ways, it's still baby steps.

"The industry overall is thinking more and more about crypto," says Brian Pollak, a portfolio manager and head of the investment policy committee at Evercore Wealth Management, which has two crypto ETFs available to clients on its platform. While the firm has some older clients with an appetite for crypto, "younger clients are more interested in it, more knowledgeable about it, or would like to talk about it more often," he says.

Turning point. A watershed event was the seal of approval from the Securities and Exchange Commission early last year when it authorized the listing and trading of 11 spot Bitcoin ETFs. That endorsement "gave regulatory certainty" to crypto investing, says Matt Hougan, chief investment officer at Bitwise Asset Management. "Once they greenlighted the ETFs, it brought it into the mainstream."

One of the funds approved by the SEC was the iShares Bitcoin Trust ETF (IBIT), which tracks Bitcoin. Its assets total about $48 billion.

"The Bitcoin ETFs have surpassed everyone's wildest expectation in terms of how much they've gathered" in assets, says John Davi, CEO and chief investment officer of Astoria Advisors. The firm, which oversees about $2.2 billion, helps financial advisors find suitable ETFs, including crypto-focused funds.

Bitwise's offerings include separately managed accounts and private accounts, "But 90-plus percent of our clients are using ETFs," says Hougan, adding that his firm's assets have grown from about $1 billion 18 months ago to around $8.5 billion today.

The Bitwise Bitcoin ETF (BITB) is the firm's largest fund at about $3.2 billion. Hougan says that financial advisors also like the $140 million Bitwise Crypto Industry Innovators ETF (BITQ), which holds publicly listed shares of crypto firms such as Coinbase Global $(COIN)$ and Galaxy Digital Holdings (GLXY).

Mark Pappa, chief investment officer at Financial Resources Group in Glastonbury, Conn., is a big believer in Bitcoin, citing what he expects will be strong growth from retail and institutional investors. The Fidelity Wise Origin Bitcoin Fund $(FBTC.UK)$ and the WisdomTree Bitcoin Fund $(BTCW.UK)$ are two of the ETFs that Pappa likes.

Crypto asset allocation. Marc Shachtman, founder and CEO of True Wealth Advisory Group in Miami, says that "there was really no way to do [crypto] for clients in a safe, attractive manner until several years ago." He typically divides client portfolios into four buckets -- stocks, bonds, private assets, and inflation-hedging assets. The latter includes gold (3.5%) and crypto (5%).

For the crypto portion, Shachtman uses a separately managed account that was created in conjunction with Bitwise. It allows investors to own the underlying Bitcoin, the largest weighting in the fund at about 75%, along with some other cryptocurrencies. "At its core it's a play on Bitcoin," he says.

Signs of growth. It's hard to measure advisor acceptance of crypto. One hint: Bitwise's annual survey. In the 2025 report, 22% of respondents said they were allocating to crypto, up from 11% a year earlier.

No doubt, the SEC approval of crypto ETFs helped make that option more popular with advisors, along with the perception that the Trump administration is more crypto friendly.

The choice of Paul Atkins, a noted crypto advocate, to lead the SEC, is likely adding to momentum. At his confirmation hearing in April, Atkins said his "top priority" in the role would be a new framework for cryptocurrency regulation.

For all the strides crypto has made in investor adoption, it still has a long way to go before it gains wide acceptance among financial advisors.

"It's still the case that most advisors have a 0% allocation" to crypto, says Hougan. "So it's still relatively early." At the same time, he adds, "We're seeing more advisors allocate, and we're seeing the average advisor allocate more," typically 2.5% to 3% of a client's portfolio.

At Evercore, another vehicle for crypto investing has been venture capital funds and funds of funds that invest in companies that focus on blockchain infrastructure. Blockchain is a system for recording crypto transactions. These venture-capital funds typically have long lockups, meaning that investors need to keep their cash parked there for several years at least. They offer exposure to crypto "without some of the volatility you get with Bitcoin and some of the currencies or digital assets," says Pollak.

Two key impediments keeping many advisors on the sidelines are crypto's volatility and the notion that it's a very difficult asset to value. Some would say impossible: "Give me a valuation model of crypto, and we'll talk," says Jonathan Treussard, founder of financial advisory Jonathan Treussard Capital Management. "There is no valuation model."

Crypto's role in portfolios. There are differences of opinion as to what role crypto should play in a portfolio. Astoria's Davi says it makes sense to use it as a diversifier, "especially if you are concerned about deficits and the debasement of the dollar." Pollak, however, views crypto as "a risk asset that should fit into your growth-oriented bucket." Warmbein says crypto can be a diversifier in a portfolio or long-term growth asset, depending on the client's preference.

What's clear is that the number of financial advisors who are trying to assess where crypto fits in a portfolio is on the rise, even if most aren't allocating to it yet. "You have to remember that most people just don't even own crypto," says Shachtman. "Most advisors aren't recommending it. We're still really early."

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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April 17, 2025 15:48 ET (19:48 GMT)

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