Crypto for Advisors: What Will Trigger Crypto Mass Adoption?

Crypto enthusiasts anxiously await everyone “getting it” and the masses entering and investing in crypto. But what will be the trigger? Will Ferrari’s announcement that you can pay for your car in bitcoin in the US tip the scales – unlikely (just my opinion)?

Andy Baehr, managing director of CoinDesk Indices, tackles this topic and discusses scenarios which could drive the world towards crypto mass adoption.

Also, please answer a few questions in our bitcoin ETF survey . We will reveal the results in next week’s newsletter.

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Repeat After Me

Can the crypto industry, skewed towards innovators, entrepreneurs and ardent futurists focus on a Bitcoin 101 campaign and create real, deep, intuition for a broader audience, including the giant distribution engine that delivers financial services?

Once you spend some time in crypto, it is easy to lose sight of a critically important objective: mass adoption as a new asset class and integration into investment portfolios. And while great promise lies ahead for a rich, diverse and dynamic universe of tokens, the first (and largest) addition to most portfolios will be bitcoin.

Two recent experiences highlight the gap between the front of the crypto product curve and its belly:

Scene 1: A spirited dinner with DeFi tablemates. The projects were fascinating and the enthusiasm palpable. These were neither frivolous nor unseasoned people. These were builders. But wait, I thought, how much potential TVL is sitting at this table? $1 billion? $5 billion?

I asked, “How are we going to get a hundred billion dollars in bitcoin integrated into investment portfolios?”

That stopped the dinner party cold. It was a problem no one felt like solving and a token that no one felt like discussing. Bitcoin’s constraints – many of which strengthen its appeal as a monetary asset – made it the wrong Play-Doh for this crowd. (Eventually, they relented.)

Scene 2:  It is raining so hard in NYC that a sea lion escaped the Central Park Zoo as I caught up with a friend over coffee. She runs a fast-growing business designing and selling portfolio-enhancing structured derivatives to institutional investors at a major investment bank. Naturally, I wanted to ask what she was doing with crypto.

“Oh, me? Nothing. I know so little about it,” she said, tacitly acknowledging my surprise. Here is a talented, tack-sharp and intellectually curious financial professional who, like many derivatives people, is an early adopter and fluent in several asset classes. This person hasn’t thought about crypto?

DeFi isn’t the only topic drawing energy away from this mission. Tokenzing RWA is the inescapable topic du jour. Crypto sectors, around which we have some market-leading products, lean on traditional sector intuition. ETH’s investment case, now featuring a measurable staking rate, fits nicely into TradFi’s mental models, even if ETH demand seems muted.

I get it. It’s hard to sing the same hymn year after year, especially when we have jobs and budgets labeled “2023.” We get fatigued talking about U.S. spot bitcoin ETF approval. We want to emerge from the regulatory paralysis, move on (with lessons learned!) from the adolescent mishaps of 2022, and focus our gaze onward and upward.

Good news: I do see some “back to bitcoin basics” initiatives. Fidelity Digital Assets chose to update its Bitcoin First report in October. Here in Crypto for Advisors, Jennifer Murphy of Runa Digital Assets proclaimed that, “a Blackrock-branded Bitcoin ETF will do more to accelerate mainstream adoption of digital assets than anything that’s happened in the history of crypto,” and Brian Rudick and Matt Kunke from GSR devoted an entire piece to Bitcoin and the Bull.

There is no shortage of early adopters in digital assets. Coinbase claims that 52 million Americans own crypto. Great, but that doesn’t solve the “last mile” problem of integration. “My investments are over here and my crypto is over there,” keeps digital assets a peripheral pursuit.

Our objective, and our discipline, has to include a steady, credible, relevant conversation about what bitcoin is, why it’s important, how it can improve investment portfolios, and why you need to care. When the products arrive, we will be ready.

– Andy Baehr, CFA, Managing Director, CoinDesk Indices

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