21Shares’ Adrian Fritz on Getting More Advisors Invested in Crypto

Crypto is big, just not so much so with advisors … yet.

Institutional adoption has largely led to crypto’s mainstream success, reaching a global market cap of more than $2.6 trillion. The White House and federal agencies are championing digital assets. Wall Street’s biggest firms are incorporating crypto and blockchain technology into their services. And online trading platforms like Kraken, Robinhood and Coinbase give retail investors exposure to all their favorite coins. 

Many advisors, however, still view crypto as too speculative and volatile to fit into a traditional financial plan. Crypto allocations are often limited to a single digit percentage of a client’s total assets or non-existent. Nevertheless, asset managers continue to pump out crypto and digital asset ETFs, partly with the goal of making wealth managers reconsider: Issuers launched almost 45 new funds last year. So what’s it going to take for advisors to hop on the bandwagon?

“Greater crypto adoption has to be a top-down approach,” said Adrian Fritz, chief investment strategist at 21Shares, a Switzerland-based crypto ETF issuer. “We always see these internal battles at firms with a few young champions who are really enthusiastic about the asset class, but the older management might be reluctant, so it doesn’t trickle down.”

ETF Upside sat down with Fritz to discuss advisors’ steadily growing acceptance of crypto products, enthusiasm for digital assets and how asset managers are trying to educate advisors on the space.

If an advisor is allocating to crypto, it’s often in the form of something like the iShares Bitcoin Trust ETF (IBIT). What would persuade them to go beyond that?

The majority of advisors start with Bitcoin. The narrative around Bitcoin, while still challenging at the beginning, is a little easier to grasp once you start going down the rabbit hole. I always say it’s good to start with Bitcoin and also to have a bit of skin in the game to understand how it functions, especially within a portfolio.

Advisors and traditional investors know of the trends around tokenization and stable coins, but they struggle to understand that some of those platforms, like Ethereum and Solana, are actually the playground or the base layer for most of that innovation. Again, the question is how do you treat that in a portfolio because the value proposition is completely different from something like Bitcoin. It’s more like a digital commodity and should sit next to something like gold. Meanwhile, Solana and Ethereum are infrastructure plays and should sit next to tech equities.  

We do think, sooner or later, we will see a decoupling in how people treat those assets.

Going into the 2024 election, there was a lot of momentum around crypto and digital assets, and it’s partly a reason why President Donald Trump won. Has that enthusiasm continued?

We have the Clarity Act still outstanding, and given that we have the midterm elections at the end of the year, we’re hopeful the act passes before then. Nonetheless, any kind of political headwinds, I see as a short-term risk. I don’t think it takes away from the adoption of Bitcoin and crypto as an asset class. The crypto story is a global one, even though the US is the most important capital market.

[The enthusiasm] has gone a little bit. People had massive expectations. The hopes were high, and there was a lot of momentum. Part of the reason why we saw such a drawdown at the end of last year is because the sentiment shifted. People got a bit more pessimistic in the short term. But once again, it doesn’t take away from how the adoption is taking place, and that’s out of D.C.’s hands at that stage.

What are asset managers doing to educate advisors on crypto and digital assets? Is it information packets, webinars, in-person seminars? What more could they be doing?

All of the above. We have a lot of written material that we send out, but we also get invited in quite a bit of in-person teachings. We bring all these advisors together for a one- to two-hour presentation as an introduction to digital assets. We cover things like blockchain 101, Bitcoin and Ethereum 101, what those products do and offer, and then we get into portfolio allocation and valuation. Those are the three blocks that are usually most effective and what advisors are interested in. 

It can be super challenging because it’s usually a mix of younger people, who can be pretty advanced in these topics, and older advisors, who are brand new to it. So you have to keep it engaging for everyone in the room. You also have to translate a lot of complex topics into easy terms and ways that make sense for traditional finance. The knowledge gap in the advisor community is super big.