Weekly Axis - January 6, 2024

More ETF talk. Visa Web3 loyalty programs. Alt Investments

Author

Adam Blumberg
January 06, 2024

Most of you weren’t expecting this?!?!?!

We’re so close to the ETF approval. Likely between Monday and Wednesday next week.

But the Bitwise / VettaFi annual research report about advisor thoughts on crypto tells us over half of financial advisors did NOT think an ETF approval would come this year.

We can only assume you’re not in this camp…since you’re reading this.

In this issue we’ll talk ETF implications short, mid, and long-term.
Visa jumping into Web3 loyalty programs
The trend toward alternative assets

Are you ready for the Spot ETFs? Do you know what conversations you’ll have with your clients?

We can help

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Axis News Updates

📉We’re Still Talking About the ETF?!?!

Maybe this is finally the week we get the approval…so we can stop speculating about the effect on prices. Until then, the guesses have been all over the map. We hear about doubling in bitcoin prices, or a “sell the news” event that will bring bitcoin prices down 20-30%.

Our friend, Caitlin Cook, took to X to post her thoughts about how we’re underestimating the effect. I agree with Caitlin.

The Ripple Effect of a Bitcoin Spot ETF

  1. Short-Term Impact: Initially, we might witness what's called a 'sell the news' moment. Despite the illogical nature of this move, given Bitcoin's fixed supply and increasing demand, market irrationality can sometimes prevail. If a sell-off does occur, remember, this might be just a blip in the grand scheme. However, I still anticipate a huge move up in bitcoin on the announcement, and then some whipsaws back and forth as liquidations and trading orders get triggered.

  2. Mid-Term and Long-Term Effects: Looking beyond the immediate, the horizon seems promising. The approval of a Bitcoin spot ETF could significantly boost institutional investment in bitcoin. It's not just about the ETFs themselves, but the broader acceptance and validation they bring. Think about the potential influx of retirement plans and 401Ks integrating Bitcoin into their offerings.

Why This Matters to You, the Advisor

Your role as a financial advisor is pivotal in this evolving landscape. With trillions of dollars under management, advisors like you are the gatekeepers to widespread Bitcoin investment among mainstream investors. The simplicity and regulatory compliance of a Bitcoin spot ETF make it an attractive tool for introducing clients to cryptocurrency investments.

Here's what's in store for you:

  • Ease of Conversation: The ETF format makes it easier for you to discuss Bitcoin investments with clients. It fits neatly into existing reporting structures, custodial platforms, and asset management models.

  • Client Demand: Your clients are curious about Bitcoin, and they're asking for it. With a Bitcoin spot ETF, you can meet this demand in a regulated, familiar format.

  • Potential for Diversification: Advising clients to allocate a small percentage of their portfolio to Bitcoin ETFs could be a smart diversification strategy, especially considering the potential long-term growth.

Remember, amidst the potential short-term volatility, the long-term view seems to lean towards a significant increase in Bitcoin demand and price stabilization. Stay informed, stay agile, and be ready to guide your clients through these exciting times in cryptocurrency investing.

Visa Embracing Web3 for Loyalty Rewards

Summary:

Visa is making significant strides in integrating cryptocurrency and Web3 technologies into their operations. The latest development is the introduction of a Web3-based customer loyalty platform. This innovative approach leverages NFTs and digital wallets, signaling a substantial shift in how loyalty programs and rewards are managed and utilized. This move is not just about adopting new technology for the sake of it; it's about efficiency, security, and giving more control and flexibility to users.

Implications for You:

  1. Understanding New Technologies: Visa’s exploration of Web3 and crypto technologies like NFTs and digital wallets is not just a fad but a glimpse into the future of financial transactions and customer engagement.

  2. Educating Clients: Clients may soon inquire about digital wallets and NFTs, especially as they become more integrated with familiar brands. You have an opportunity to guide them through this new landscape, ensuring they understand both the opportunities and risks involved.

  3. Broader Market Impact: Visa's venture into Web3 could accelerate widespread adoption of these technologies. This could lead to a domino effect, with other major players following suit. Understanding these market dynamics will be crucial for advising clients on potential investments.

  4. Security and Ownership: With the increase in digital transactions, discussions about security, transparency, and ownership become more pertinent. This is an excellent opportunity to discuss self-custody and asset ownership in the digital age with your clients.

  5. Potential Marketplaces for Loyalty Points: The possibility of trading or selling loyalty points and experiences (like concert tickets as NFTs) could emerge as a new market. Advising clients on these novel asset classes could become a part of your service offerings.

  6. Long-Term Savings for Companies: As companies like Visa adopt blockchain technology for data management, they’re likely to see long-term cost savings. This might impact their business models and stock values, which is vital information for investment strategies.

  7. Emphasizing Adaptability: Visa's move shows the importance of adaptability in the financial sector. Encourage clients to be open to new technologies and investment opportunities while maintaining a balanced and risk-aware approach.

  8. Driving Crypto Prices: More use of a network like Ethereum or Solana for loyalty NFT transactions should drive demand for the native tokens - ETH and SOL - of those networks. This may increase the price of those tokens

The Future

🌐Embracing the Shift: Why Alternative Assets will Likely Become a Staple in Client Portfolios

Hello there! As financial advisors, we're constantly navigating the ever-evolving landscape of investment opportunities for our clients. Today, I want to delve into a significant trend that's reshaping portfolios: the growing interest in alternative assets.

The Rise of Alternative Assets: Understanding the Why

In the last 15 years, low interest rates have been the norm, driving clients primarily towards publicly traded equities. This trend was fueled by the ability of companies to borrow at low rates, leading to significant growth in equity values. However, we're entering a phase where this may no longer be the case. With potential shifts in economic growth and inflation, equities may not continue to soar as they have. This change necessitates a new approach to portfolio diversification, not just in terms of growth but also income potential and risk management.

Impact on Advisors: Navigating the New Investment Landscape

  1. Diversification Beyond Equities: It's time to look beyond traditional stocks and bonds. The focus is shifting towards assets that behave differently from the usual market offerings, providing a cushion against market fluctuations.

  2. Income Generation: With the possibility of equities not yielding high returns due to changing economic conditions, alternative assets that offer stable income streams become attractive. This includes private credit, real estate, and potentially, royalties from unique investments like music collections.

  3. Technological Advancements: The good news is technology is on our side. We now have the tools to efficiently manage investments in real estate, private credit, and other non-traditional assets, allowing us to better track income streams and integrate them into broader portfolio strategies.

  4. Client Preferences: The younger generation of clients, now in their 30s and 40s, are seeking more than just traditional ETFs. They're interested in owning diverse assets like art, collectibles, wine, and whiskey collections. These assets not only offer diversification but also resonate with their personal interests and lifestyle choices.

  5. The Role of Cryptocurrencies: Crypto and blockchain technologies are becoming a part of this alternative asset sleeve. While currently more relevant for their risk profile, they represent a growing area of interest, especially among younger investors.

  6. Adapting to Client Needs: As advisors, it's crucial to understand and adapt to these shifting preferences. Our role is to guide clients through this new terrain, ensuring their portfolios are well-diversified and aligned with their financial goals and risk tolerance.

Conclusion

Alternative assets are no longer just an option but a necessity in modern portfolios. By understanding this shift and leveraging technology, we can provide clients with the diversification and income potential they need in today's dynamic economic environment. Stay ahead of the curve and embrace these changes to better serve your clients' evolving investment needs.

2024 is going to be a banner year for crypto and blockchain adoption, so we’re glad you’re here to get ready for it and help your clients.

Happy New Year!

-Adam and Ron