deVere Group

Millionaires flock to crypto: 82% sought investment advice in 2022

A recent study from deVere Group found roughly four out of every five of their high-net-worth clients had asked their financial advisers about adding crypto to their portfolios.

Despite a challenging year for crypto, 82% of millionaire clients had looked into investing in digital assets such as Bitcoin (BTC) in 2022, according to a recent poll conducted by financial advisory firm deVere Group. 

The poll results, released on Jan. 30, found that eight out of every 10 of the firm’s high net-worth (HNW) clients surveyed — individuals with between $1.2 million and $6.1 million of investable assets — sought advice on crypto from financial advisers in the last 12 months.

Nigel Green, the CEO and founder of deVere Group, said that despite the surveyed group being “typically more conservative,” he believes the interest stems from Bitcoin’s core values of being “digital, global, borderless, decentralized and tamper-proof.”

Previous years’ studies from the firm have shown a trend of increasing interest in crypto investments from wealthy investors.

A 2020 study from deVere found that 73% of the 700 surveyed high-net-worth individuals either already owned or were looking to invest in cryptocurrencies before the end of 2022, while the firm’s 2019 study found that 68% of global HNW individuals were already invested or planning to invest in crypto by the end of 2022.

Green also notes the uptake in interest in offering crypto services to clients by legacy financial institutions like Fidelity, BlackRock, and JPMorgan as a good sign for the industry.

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A June report from PricewaterhouseCoopers found that roughly one-third of the 89 traditional hedge funds surveyed were already investing in digital assets such as BTC.

The deVere CEO believes this momentum of interest could build further as the “crypto winter” of 2022 thaws in the wake of changing conditions in the traditional financial system.

“Bitcoin is on track for its best January since 2013 based on hopes that inflation has peaked, monetary policies become more favorable, and the various crypto-sector crises, including high-profile bankruptcies, are now in the rear-view mirror.”

“The world’s largest cryptocurrency is up over 40% since the turn of the year, and this will not go unnoticed by HNW clients and others who want to build wealth for the future,” Green added.

Wealthy individuals are not the only ones who have increased their crypto holdings over the last year.

According to a Dec. 13 report by JPMorgan Chase, around 13% of the American population — roughly 43 million people — have held cryptocurrency at some point in their lives, up from only around 3% in 2020.

Fed money printer goes into reverse: What does it mean for crypto?

What will happen to the crypto markets when quantitative tightening takes full effect and the Federal Reserve shelves the money printer?

The United States Federal Reserve is starting the process of paring back its $9 trillion balance sheet that ballooned in recent years in a move called quantitative tightening (QT). 

Analysts from a crypto exchange and financial investment firm have conflicting opinions about whether QT, starting on Wednesday, will put an end to a decade of unprecedented growth across crypto markets.

Laypeople can consider QT the opposite of quantitative easing (QE), or money printing, which the Fed has been engaged in since the start of the COVID-19 pandemic in 2020. Under QE conditions, more money is created and distributed while the Fed adds bonds and other treasury instruments to its balance sheet.

The Fed plans on shrinking its balance sheet by $47.5 billion per month for the next three months. In September of this year, it plans on a $95 billion reduction. It aims to see its balance sheet reduced by $7.6 trillion by the end of 2023.

Pav Hundal, manager at the Australian crypto exchange Swyftx, believes that QT could have a negative impact on markets. He told Cointelegraph on Wednesday that “it’s very possible thatyou might just see growth in market cap trimmed slightly:”

“The Fed is culling assets harder and faster than a lot of analysts had expected and it’s difficult to imagine that this won’t have some kind of impact on investor sentiment across markets.”

Initiated in March 2020, the impact of QE on the crypto market was dramatic. CoinGecko data shows that the crypto market cap languished through 2019 and early 2020, but a vibrant bull market began in late March 2020 as the money printer fired up. The total crypto market cap burst from $162 billion on March 23, 2020, to a peak of just over $3 trillion last November.

Over a similar time frame, the Fed balance sheet increased 2.1 fold from $4.17 trillion on January 1, 2020, to $8.95 trillion on June 1, 2022. That is the fastest rate of increase since the last global financial crisis starting in 2007.

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Financial advisory firm deVere Group CEO Nigel Green believes market reactions to QT will be minimal because “it’s already priced in.” Green said there may be a “knee-jerk reaction from the markets” because of the unexpected speed with which QT is being rolled out, but he sees it as a little more than a wobble:

“Furthermore, we expect a market bounce imminently, meaning investors should be positioning portfolios to capitalise on this.”

Wage increases among American workers, especially in the hospitality industry, have already been observed as labor demand remains high. Assuming wages remain high through QT, the U.S. may emerge from the economic downturn with lower income inequality. Crypto market analyst Economiser explained in a Tuesday tweet that if people wind up with more cash in their pockets from their higher wages, “the crypto market could ultimately benefit” from QT.

Hundal added that while markets are experiencing increased volatility lately, Bitcoin (BTC) could benefit as it is now demonstrating its position as a bellwether asset. He noted that Bitcoin dominance is currently at about 47%, up by eight percentage points from the start of 2022. He said, “There are different ways to interpret this,” adding:

“It does suggest that market participants are seeking to park value in Bitcoin, meaning we could see weakness continue to trend across alt coin markets if current market conditions continue to play out.”