Episode: Chris King the Founder and CEO of Eaglebrook Advisors, which provides independent financial advisors with seamless, secure, and compliant access to Bitcoin and digital assets through their proprietary separately managed account platform.
Insight: The Bitcoin conversation is mainstream and it’s difficult for financial advisors to avoid it. Educational resources about Bitcoin, Ethereum, and other digital assets is widely available. Consumer access to buying digital assets is now as simple as opening an app. But until recently, it was difficult for financial advisors to have a seamless way to trade, monitor, and get paid on digital assets. Eaglebrook and other forward-thinking companies have now created platforms that make this technology more accessible and more secure. In today’s conversation, I talk to Chris King, the founder of a company that offers a digital assets SMA platform for advisors that greatly simplifies the process of getting your clients into crypto.
3 Quotes from Chris King:
1. I think it was probably around March, April, Bitcoin was over $50,000, client demand was through the roof. I started to hear a lot of advisors and owners of these RIAs say, ‘This is now defensive. This diligence process might take three to six months, but we need to do this because we know this isn’t going away.’ So it’s kind of what everyone had been saying since 2016: This is going to be an asset class that isn’t going away. This is going to be important. So it’s definitely something you need to look at. I think there is somewhat of a sense of urgency in getting up to speed on it, because the risk is that if a client’s deciding between you and another advisor, and that advisor understands this and can offer, Bitcoin, Ethereum, eventually defi and all these other strategies in this structure, they’re going to go with that one. So it’s almost defensive and it’s also a way to differentiate yourself without doing a ton of work. You can spend a weekend going through a lot of our research materials and get a pretty good understanding of how to talk to clients about it, which we think is the most important part.
2. Bitcoin has around 120 million users right now. It’s growing at a fairly fast pace, 116% per year. If you believe that adoption will continue for a variety of different reasons, then all you’re betting on is an adoption curve that’s similar to the internet. And by 2025, if it does follow a similar adoption curve to the internet, Bitcoin can have a billion users. And with Metcalfe’s law, that means the market capitalization and total value of the asset class and Bitcoin specifically will grow. So we follow that fairly closely.
3. Bitcoin is slightly more volatile than equities, but it’s basically liquid. And the way we put it in a portfolio is actually viewing it as a technology investment in an equity. And it fits into there because it is a network similar to a lot of these major networks that we actually invest in. We would say it fits within equities, but what’s great is that it’s non-correlated so it also has the impact of improved diversification, which can reduce exposure to economic cycles and increase risk-adjusted returns. Take it out of the equities piece of the portfolio, do it as a technology investment, with basically venture capital style risk-return profiles. And then also it can be part of the alternative investment bucket as well. So you kind of get both. But if you wanted to make a 4% allocation, I wouldn’t take 2% out of your alts bucket, take 2% of your equities. I would just choose one.