No Client Exodus From Crypto After FTX Collapse, Advisors Say

Nick Rygiel, financial advisor and Ironclad Financial LLC owner, indicated his clients hadn’t lost interest in crypto.

“My clients that are involved with crypto were aware of the extreme volatility of digital assets upfront and practiced sound risk management, keeping their exposure to an appropriate level and realizing that another event similar to what occurred with Terra could happen again,” Rygiel said via email, referring to the Terra network’s TerraUSD stablecoin and LUNA companion token’s fall in May.

“They remain optimistic in the long term and realize high volatility may continue as counterparties associated with Alameda and FTX may begin to emerge over the next few weeks,” he added.

Clients are asking about self-custody, such as hardware wallets versus keeping assets on exchanges, and potential investment opportunities such as Coinbase stock, Rygiel said. Those with greater experience and who are accredited investors are involved with decentralized finance, or DeFi, such as Uniswap v3 liquidity pools (for example seeking alternative yield strategies using stablecoins) and the Aave and Curve platforms, he said.

Jeremy Bohne, Paceline Wealth Management founder and financial advisor, says that while he’s “not a fan” of crypto and doesn’t use it with clients, he gets a lot of questions from clients who invest in crypto on their own. He sees a mix of sentiments among those clients.

“Some are recognizing that crypto is neither stable nor an effective hedge against inflation. People in this camp are looking for an eventual exit,” he told ThinkAdvisor via email.

“Others remain committed to this asset class, and understand the risks involved, and these investors are looking for ways to have their holdings moved to a regulated custodian. Even in cases where people fully understand and can tolerate the level of investment risk involved, the idea that their money could go missing is totally unacceptable, nor should it be (acceptable),” he said.

“That’s why we’re seeing things treated differently where a qualified custodian is involved. News this week is a worst case scenario of the opposite of that,” he said last week. “Clients own this, and I get a lot of questions, but not something I’ve used with them, as I’m not a fan,” Bohne said.

Several people tweeted Friday that their FTX accounts showed zero balances, and early Saturday the general counsel for FTX US tweeted the platform was moving all digital assets to cold storage to mitigate damage from “unauthorized transactions.”