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Crypto is so hot right now.
Bitcoin continues to dominate headlines as the flagship cryptocurrency, though the rapid rise of Ethereum has recently captured investor's attention. And Dogecoin, the internet's favorite cryptocurrency, is hitting new highs ahead of Elon Musk's forthcoming appearance on SNL.
With the popularity of cryptocurrencies continuing to grow, companies far and wide are finding ways to get in on the action. US banks will soon allow their clients to connect with cryptocurrency lenders, and S&P Dow Jones Indices is launching three new indexes that will track the performance of cryptocurrencies. Meanwhile, payment processors like Mastercard and Visa have begun to accept cryptocurrencies, and even baseball teams are accepting Dogecoin for tickets to games.
Given the hype surrounding cryptocurrencies, you might think that wealth management companies would be scrambling to jump into the sector and offer their clients crypto investment options. But the industry appears to be more divided than at first glance.
Some Wall Street firms are embracing crypto. For instance, JPMorgan will soon provide investors with an actively-managed bitcoin fund, Goldman Sachs has reportedly launched new bitcoin derivatives for investors, while fellow competitor Morgan Stanley will offer wealthy clients three bitcoin funds.
But other wealth management firms are taking a more cautious approach in spite of cryptocurrency's popularity.
During the recent Bloomberg Wealth Summit, Gregory J. Fleming, the CEO of Rockefeller Capital Management, and Sarah Levy, the CEO of Betterment, were both asked about their views on cryptocurrencies and how they're approaching the hottest investment du jour. While both were cautiously optimistic about the future of crypto, they made it clear that they aren't prepared to offer clients a way to invest in them just yet.
Rockefeller, a firm with $75 billion in assets, helps clients deal with a wide array of financial needs. Fleming is well aware of his clients' demand for investing in cryptocurrencies, but made it clear that he is approaching the crypto space carefully.
"Our view on the whole crypto and digital currency space is that this is a change that is in the early stages, and you see that in the volatility around the price of the different ways of participating in this," said Fleming. "It is probably something that is more secular in nature, though. Digital currencies are going to be part of the future."
Part of the difficulty in assessing how to go about investing in cryptocurrencies has to do with government oversight. Governments and central banks "can create winners and losers" in cryptocurrencies, says Fleming. "So utilizing blockchain technology, digital currency is coming, but governments and central banks are going to weigh in and they're going to have a major impact on exactly how this unfolds and what those early investments ultimately are worth."
Treasury Secretary Janet Yellen has already spoken out by calling bitcoin a " highly speculative asset" in February, and suggesting at the WSJ CEO Council Summit this week that the US did not have an adequate regulatory framework for cryptos.
Fleming, however, is optimistic about the future of digital currencies, going so far as to call them a "game changer" and the "engine of commerce in so many ways going forward." But given the volatility of the space, he's going to advise clients to be very cautious about investing in cryptocurrencies.
Meanwhile, Levy is also cautiously optimistic about cryptocurrencies. Betterment, a robo-advisor firm with $29 billion in assets under management, has grown exponentially this year thanks to the surging number of retail investors. But Levy isn't quite ready to offer her customers crypto investments just yet.
"I think we're in early innings on crypto," says Levy. "I think we're believers that if we can provide the right kind of context and advice that it's okay to participate in some of these newer asset classes. And so I'd like us to find a way to responsibly offer crypto but I can't say that we're there yet. I think we're still in kind of watch and learn mode right now."
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See Also:
- The head of global macro strategy at Delphi Digital breaks down why Bitcoin's price has more room to run over the next 9 to 12 months in 4 charts — and shares what the next 10 years could look like for the emerging crypto economy
- A crypto VC firm that made an early investment in Ethereum is betting big on Polkadot. The founders explain why dot could overtake ether — and flag 2 promising DeFi projects that should be on your radar.
- Ex-Ark analyst James Wang breaks down his bull case for Ethereum as its token breaches an all-time high of $3,300 — and explains why it could eventually reach $40,000
