Global institutional investors are increasing allocations to digital assets in a shift which may have implications for Australian financial advisers.

A new joint report by EY Parthenon and Coinbase found that 86% of institutional investors either had exposure to digital assets in January 2025 or planned to allocate capital to them over the course of this year.

The finding is another indication of a growing acceptance of digital assets as an investment class that is likely to translate into increased inquiries from clients to advisers. Planners may need to engage in conversations with those clients about the relative merits of crypto currency, even if it does not today, feature in their typical recommended products or asset allocation.

Australian retail investors’ interest in crypto is already indicative in the Australian Taxation Office’s quarterly self-managed superannuation (SMSF) asset allocation figures, which show that SMSFs held ~$1.7 billion in cryptocurrency in December 2024 versus $199,000 just five years prior.

Vakul Talwar, Head of Australia at Crypto.com, argues that such trends are driven by a growing recognition of the potential benefits of crypto currencies, including as a source of financial resilience in uncertain times.

“As inflation bites and market volatility puts pressure on traditional investments, Australians are increasingly using digital assets to diversify their portfolios, protect their savings, and take advantage of emerging technologies that can reshape how we think about finance. We’re also seeing a rise in ‘everyday’ use cases – from paying for groceries to booking travel – which is accelerating mainstream adoption,” says Talwar.

Perception vs reality

Despite the apparent rise in interest, research by CoreData has found a gap between Australian advisers’ estimations of their clients’ crypto investments and reality. The research firm previously found that 77% of financial advisers estimated that fewer than 5% of their clients hold crypto or crypto ETFs , however 38% of investors were identified as holding crypto assets.

The new joint report by EY Parthenon and Coinbase was based on a survey of 352 institutional investors with more than $US1 billion in assets under management and found evidence that crypto investments were part of broader asset allocation decisions.

Some 62% of respondents were based in the United States. Another 28% were from the United Kingdom and Europe.

The survey found 59% of respondents plan to allocate over 5% of their assets under management to cryptocurrencies this year, with US investors and hedge funds most likely to adopt such a strategy.

Some 60% of respondents preferred to gain exposure to crypto through vehicles like exchange traded products, diversified index funds, altcoin exchange traded products, and US-based perpetual futures.

In Australia, there are eight exchange traded products focused on crypto assets with a collective $570.7 million in assets under management, according to Cboe’s April Australian Funds Market Report.

The largest, VanEck’s Bitcoin ETF (ASX: VBTC), has ~$229.8 million under management. The Global X 21Shares Bitcoin ETF (ASX: EBTC) has a similar amount at ~$204.5 million but the remaining six local ETFs range from just $3.3 million to $52.3 million in assets under management.

VanEck bills its ETF as giving “investors exposure to the price of bitcoin, before fees and other costs, via an ETF, which provides investors institutional-grade protection.” Global X also says that its product provides investors with “an arguably more secure way of trading and owning Bitcoin than what is available on unregulated crypto venues”.

Undeniable volatility

The performance of VanEck’s Bitcoin ETF serves to highlight the volatility of the asset class to advisers’ clients who may not fully appreciate the difference between it and traditional asset classes such as shares.

The fund returned ~37.3% in the six months to April 30 this year but lost ~10.1% of its value in the three months to the same date.

Nonetheless, more strong gains from Bitcoin over May may drive an increase in inquiries from retail investors about the relative merits of adding crypto currencies to their portfolios.

“Bitcoin’s surge in May reflects two key drivers: increasing regulatory clarity in the US and its continued evolution into a store of value and portfolio diversifier amid ongoing global macro uncertainty,” says Edward Carroll, Head of Global Markets and Corporate Finance at MHC Digital Group.

“With a fixed supply dynamic and growing demand driving the price higher in the medium-term, we see significant upside from here. We maintain our view that BTC will reach at least US$160,000 by Q4 2025 and US$1 million by 2030 as this thesis plays out,” Carroll says.

Various research continues to indicate that crypto currency is being bought more often by institutional investors – in a trend which may eventually provide impetus for its addition to retail portfolios overseen by financial advisers.

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