By Tom Taulli

Investors who bought Bitcoin in the past year have had a rough time of it, which is somewhat surprising. Last year appeared to be a major positive inflection point for digital currencies. The Trump administration took a pro-digital-asset approach, spearheading the passage of the Genius Act. This allowed for a federal system for stablecoins, which is crypto tied to traditional assets like the U.S. dollar. President Donald Trump also signed an executive order that created a Strategic Bitcoin Reserve and a U.S. Digital Asset Stockpile.

Meanwhile, crypto continued to gain adoption from Wall Street institutions and corporate Treasuries. And there were the various public offerings, such as with Circle Internet Group, Gemini, and Bullish.

However, since Bitcoin hit a record high of $126,273 in October, the environment for crypto has become increasingly bearish. Bitcoin is now trading around $66,000, a nearly 50% drop from the high.

For financial advisors with clients holding crypto allocations, a primary goal should be helping them avoid selling at a low. Here are a few suggestions for doing that:

Focus on the long term. During harsh bear markets, it can be easy to lose sight of a long-term perspective. "A high-conviction framework is holding Bitcoin for five to 10 years, plus," says Stu Bradley, a wealth advisor at Hightower Signature Wealth. "Bitcoin is also prone to leverage in the ecosystem, which can amplify selloffs, but that does not invalidate the role it can play in a diversified portfolio."

Think about why you invested in the first place. It's important for clients to keep front of mind the reasons they have exposure to crypto. Besides the growing institutional adoption and positive regulatory stance, these are other reasons investors may choose to hold digital assets:

   -- For diversification: Crypto can behave differently than stocks and bonds. 
      Even a small allocation can help improve portfolio diversification. 
 
   -- As a currency hedge: Fiscal and monetary policies of governments can 
      greatly impact the value of one currency compared with another. This 
      isn't the case with crypto. 
 
   -- For access to Innovation: The blockchain is the foundation of trends like 
      tokenization, digital payments, and decentralized finance. Advances in 
      these areas can help to bolster demand for cryptocurrencies. 

Consider tax-loss harvesting. According to Christopher King, the founder and CEO of Eaglebrook, a crypto investment platform for wealth managers, tax efficiency is a key advantage of cryptocurrencies. "Unlike equities, crypto isn't currently subject to the wash-sale rule in the U.S., which creates opportunities for active tax-loss harvesting in volatile markets, " he says. "For taxable investors, that tax alpha can materially improve after-tax returns over time."

Keep in mind Bitcoin's history of rebounding. Advisors with clients allocated to crypto should share some charts. Investors will see that while there have been multiple bear markets in crypto, all of them have been followed by strong recoveries.

"The headlines tend to treat drawdowns as proof-of-failure," says Bradley. "As regards the flagship digital asset, Bitcoin, investment practitioners who analyze activity on the Bitcoin Blockchain generally treat drawdowns as the market doing what it always does: Testing conviction, flushing leverage, and redistributing coins from weak hands to stronger hands."

Bradley says that the February plunge coincided with drawdowns across other asset classes. "The plunge changes the time horizon of the conversation, not necessarily the thesis," he says.

Remember to rebalance. King says advisors are generally recommending allocations for clients in the 1% to 2% range. Over time, this can grow to a 3% to 5% allocation. This amount is best for clients with higher risk tolerance or longer time horizons.

"Advisors are increasingly treating crypto like any other asset class -- rebalanced, risk-managed and integrated into the broader portfolio," said King. That's how advisors should talk to clients about their own crypto investments. "The conversation has shifted from 'should clients own crypto?' to 'how should crypto fit responsibly into a well-constructed portfolio?'"

Finally, advisors need to make sure they know how clients hold crypto, if it isn't part of the accounts they directly oversee. Generally, investors use two main methods: indirect and direct.

With indirect, a client will purchase publicly traded securities like ETFs, miners and exchanges. "These vehicles can be familiar and operationally simple, but they come with trade-offs including tracking error, fees, structural constraints and limited tax flexibility," says King.

Direct exposure means that the client owns the digital asset. This can be with a self-custodied wallet, on an exchange, or in a separately managed account $(SMA)$. For the client, owning direct can provide more transparency and control over tax consequences.

Tom Taulli ( @ttaulli ) is a freelance writer, author, and former broker. He is also the founder of EmbedCalcs , which is a provider of online financial calculators. He is a long-term holder of crypto assets.

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.

(END) Dow Jones Newswires

February 27, 2026 12:23 ET (17:23 GMT)

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