Ritholtz’s Josh Brown on crypto winter and investing in digital assets
June 17, 2023 Alex Rustok
Bitcoin is up 50% this year, but don’t call it a new bull market, says Josh Brown . The founder and CEO of Ritholtz Wealth Management spoke exclusively with CNBC Pro at the Digital Assets Council of Financial Professionals’ VISION conference in Austin, Texas this week. He said that between the hostility toward crypto businesses from U.S. regulators this year and investors across markets still recovering from a rough 2022, the crypto market is at a standstill, although it probably won’t stay that way. “This market keeps chugging along and eventually it will come back into focus,” he said. “There’s just been a lot of pain and a lot of damage. I don’t think advisors really have any reason to be compelled to have these conversations with clients and clients aren’t asking for it.” For some, the case for a new crypto bull market took hold at the start of the year and gained strength as the banking crisis unfolded in the U.S. in March – even amid the regulatory crackdown. But for the last three months, with a lack of catalysts, liquidity exiting the market and the chill that regulators have lately put on the market, price action has been apathetic. “We’re in a crypto winter,” Brown said. “That will change … at some point, but right now, conversations between advisors and clients about this digital assets world are at a minimum.” BTC.CM= YTD mountain Bitcoin’s price action has been apathetic since the early 2023 rally petered out. It doesn’t help that most of the crypto trading that takes places is still speculative, he added. To some extent and in some pockets of the industry, that may always be, but many crypto market participants and most of the developers in the industry believe the technology needs to prove its utility to take prices higher. “[If tomorrow you] woke up and there was no crypto … I don’t think your life would change one iota. That, from my perspective, demonstrates the failure of blockchain,” Brown said. “I don’t think it’ll stay that way forever.” Brown began by saying the ebb and flow of interest in crypto by the general public is based on price, and urged those who really want to understand what’s happening to follow along through both the ups and the downs. How to invest in it Brown said he bought his first bitcoin in 2017 and has been involved in crypto ever since, though he’s not buying it on a regular basis. At the end of 2021, Ritholtz partnered with WisdomTree to launch the RWM WisdomTree Crypto Index to offer exposure to the crypto market through a financial advisor. Brown said he’s invested in the various protocols that make up that index “and I leave it alone.” Advisors hold trillions of dollars in assets under management but with the growing interest in crypto in recent years, not to mention the regulatory status of the coins themselves or the platforms they’re traded on, advisors are in a difficult position trying to manage crypto investments in a way that works with their practice or even understanding the asset class enough to make recommendations. Still, Brown maintained that buying spot bitcoin is the superior way to get exposure. He noted that some investors like to buy crypto-related equities (publicly traded bitcoin mining companies, for example, or certain chipmakers, or companies that hold a lot of bitcoin on their balance sheet, such as Microstrategy ). Brown said he himself doesn’t follow this strategy, but he understands it. “I don’t think everyone has to, but if you want to, I think holding bitcoin outright is maybe the most common sense approach. … There’s not a suitable ETF,” he said. It’s been about 10 years since Gemini’s Cameron and Tyler Winklevoss first filed to register their planned spot bitcoin ETF and one still hasn’t been approved, although there are a handful of bitcoin futures ETFs that have been. That’s a no from Brown. “I don’t think individual investors should be involved in bitcoin futures,” he said, “because there’s no passive way to do that. You’ve got two contracts— they have a finite life. You’ve got to roll those over by the next set of contracts when they expire. I don’t think it’s something that regular investors put themselves in a position to do.”
