In light of President Donald Trump’s recent executive order promoting the development of cryptocurrencies in the United States, interest in the digital currency is on the upswing among many investors. Some clients might share in this interest. New ways to invest in crypto have emerged in the past few years, including funds that limit downside risk.
While this has had a short-term impact on the price of crypto, what does this mean over the longer term? What does the future of crypto as an asset class look like? How does all of this affect how advisors should approach crypto from a risk tolerance standpoint?
During 2024, 22% of advisors reported that they had allocated client assets to crypto, about double the 2023 rate. In a post-election survey conducted by Bitwise Asset Management and VettaFi, about 56% of the advisors surveyed indicated they were more likely to invest in crypto in 2025 as a result of the election.
Crypto Access and Allocation
Despite the favorable stance the Trump administration has taken, crypto remains a risky asset class. As with any asset class, advisors need to decide if this is an appropriate investment for their clients, how to invest and how much to allocate.
That said, many advisors note that clients are investing in crypto outside of their advisory relationship. Ideally, these clients would integrate crypto investments into the overall asset allocation in their managed portfolios.
One issue for many advisors is access. According to the recent Bitwise/VettaFi 2025 survey on financial advisors and crypto assets, even with the emergence of spot bitcoin and ethereum exchange-traded funds, only about 35% of respondents indicated that they were able to buy crypto in their clients’ accounts.
Client Portfolio Risk
Another key issue advisors need to consider is the risk associated with allocating crypto to clients’ portfolios.
Recent research from Wilshire Indexes analyzed the risk and return impact of bitcoin on a range of stock and bond allocations, using data from 2011 to 2024.
Wilshire used five basic allocations in its analysis:
- Conservative: 20% equity, 80% fixed income
- Conservative/Moderate: 40% equity, 60% fixed income
- Moderate: 60% equity, 40% fixed income
- Moderate/Aggressive: 80% equity, 20% fixed income
- Aggressive: 90% equity, 10% fixed income
The research found that, from the standpoint of risk-adjusted returns, an allocation of 2% bitcoin in the conservative portfolio and 7% in the aggressive portfolio yielded the most benefit. But a look at the share of portfolio risk contributed by each asset class in the portfolios shows just how risky and volatile even a small amount of bitcoin is.
In the conservative portfolio without bitcoin, equities contributed 64.6% of risk and fixed income 35.4%. In the aggressive portfolio, equities contributed 98.5% of risk and fixed income 1.5%.
The other three asset allocation portfolios fell proportionately between these two in terms of the contribution to risk for equities and fixed income.
For these same portfolios with bitcoin added, the contributions to risk are radically different.
The conservative portfolio had a 2% allocation to bitcoin and the aggressive portfolio had a 7% allocation, with equity and fixed income reduced proportionately.
For the conservative portfolio, bitcoin contributed 75% of the risk, while equities contributed 16.3% and fixed income 8.9%. The portfolio's volatility was 7.4%, compared with 5% for the portfolio without bitcoin.
For the aggressive portfolio, the risk contributions were 78.9% for bitcoin, 20.8% for equities and 0.3% for fixed income. The portfolio's volatility was 20.8%, compared with 12.9% for the portfolio without bitcoin.
Again, the other three asset allocation portfolios fell proportionately between these two in terms of the contribution to risk for equities and fixed income.
This analysis points to the fact that we want to be careful in how we include and evaluate crypto in a client’s portfolio when looking at risk and their asset allocation. Also, your client’s asset allocation may already include an allocation to other, less volatile alternatives.
Crypto ETFs
In 2021, the first bitcoin-linked exchange-traded product — ProShares Bitcoin Strategy ETF (BITO) — was launched. Last year saw the Securities and Exchange Commission approve the launch of 11 spot bitcoin ETFs, after a fight of more than a decade to get these ETFs approved. More than 30 bitcoin ETFs are currently traded on U.S. exchanges.
Like any exchange-traded fund, an ETF trading bitcoin or related cryptocurrency offers a level of diversification that trading an individual cryptocurrency does not. While the diversification benefits may be a bit different than ETFs that are based on the S&P 500, crypto ETFs offer an ease of trading that may not be as readily available with individual cryptocurrencies.
In some cases, when the underlying cryptocurrency hits a new high, clients might be advised to sell some or all of the ETF position to realize some of those gains, especially if the ETF is held in an individual retirement account. The ETF format makes this convenient to do.
Bitcoin Buffer ETFs
Calamos Investments recently announced the launch of its Bitcoin Structured Alt Protection ETF (CBOJ), a buffer ETF offering investors 100% downside protection, with a cap on the upside potential. The cap is 11.55% (gross)/10.86% (net).
CBOJ, which works like other buffer ETFs, is the first bitcoin buffer ETF offered by Calamos. The firm also offers a number of structured protection ETFs focused on various types of investments.
The outcome period for CBOJ started Jan. 22 and runs through Jan. 30, 2026. Investors who bought the ETF at the start of the period and who hold the ETF through the end can participate in any gains in bitcoin up to the initial cap rate of 11.65%. This is a gross rate; the net cap that investors will realize would be slightly less.
Pros of CBOJ include:
- Downside protection for investors.
- Upside potential. Though limited, the upside potential of CBOJ combined with the downside protection makes this and similar ETFs a low-risk way to invest in bitcoin.
- Diversification. The risk mitigation of an ETF like CBOJ can open the door to crypto investments for clients who may not be comfortable with the risk level of a direct investment.
- Limited upside potential compared with a direct bitcoin or other type of crypto investment.
- Defined outcome period. With an investment in the ETF after the start of the period, an investor may not fully benefit from the full level of downside protection.
- Expenses. The expense ratio is a rather high 0.69%.
- Complexity. The structure of these ETFs can be harder for some to understand than a more conventional ETF.
Other Crypto Investing Options
There are a number of platforms available for advisors to invest client assets in bitcoin and other forms of crypto. There is also, of course, the option of investing in crypto wallets.
How to invest in crypto for clients for whom it is appropriate will continue to evolve, and it is incumbent upon advisors to select the best methodology taking various factors into account.
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