QUESTION: With the recent surge in crypto prices, how should advisors evaluate risk and suitability for clients considering digital assets?
RESPONSE: Advisors evaluating risk and suitability for clients considering digital assets should take into account several factors highlighted in recent news:
- Regulatory Developments: The regulatory landscape is evolving, with significant policy changes potentially on the horizon. For instance, the U.S. is considering a bitcoin reserve strategy, and there are ongoing discussions about a federal framework for crypto regulation, including stablecoins and market oversight[1][2]. Advisors should stay informed about these developments as they can impact the risk profile of digital assets.
- Market Volatility: Digital assets are known for their volatility. For example, Bitcoin’s price has recently surged past $120,000, and Ethereum has reached a six-month high near $3,700[3][4]. Advisors should assess whether clients have the risk tolerance to handle such volatility.
- Diversification and Risk Factors: It’s important to understand that investing in a portfolio of digital assets might not provide the diversification benefits expected. Investors may find they are exposed to a single risk factor: demand for speculative narrative and crypto hype[5]. Advisors should evaluate whether clients’ portfolios are sufficiently diversified.
- Technological and Market Infrastructure: The crypto market is maturing, with developments such as the potential public listing of cryptocurrency exchanges like Bullish[6]. Advisors should consider the robustness of the market infrastructure when evaluating the suitability of digital assets for clients.
- Client Education and Understanding: Advisors should ensure that clients understand the unique characteristics and risks associated with digital assets. This includes the potential for regulatory changes, market volatility, and the speculative nature of these investments.
By considering these factors, advisors can better assess the risk and suitability of digital assets for their clients, ensuring that investment decisions align with clients’ financial goals and risk tolerance.
References
[1] ‘Unleash The Next Wave’—$4 Trillion Crypto Braces For ‘Big’ Price Catalyst As Bitcoin, Ethereum And XRP Soar [Forbes] “U.S. policy is the next big catalyst,” Javier Rodriguez-Alarcon, chief investment officer with XBTO, said in emailed comments, pointing to U.S. president Donald Trump’s digital asset task force’s report that’s due July 22 and “could introduce sweeping policy changes, with speculation around a potential bitcoin reserve strategy.” https://www.forbes.com/sites/digital-assets/2025/07/17/unleash-the-next-wave-4-trillion-crypto-braces-for-big-price-catalyst-as-bitcoin-ethereum-and-xrp-soar/
[2] ‘Unleash The Next Wave’—$4 Trillion Crypto Braces For ‘Big’ Price Catalyst As Bitcoin, Ethereum And XRP Soar [Forbes] Trump’s Working Group on Digital Asset Markets has until July 22—180 days after Trump’s January 23 executive order establishing the group—to submit its final report on a proposed federal framework for the regulation of crypto, including stablecoins, market oversight, and consumer protection. https://www.forbes.com/sites/digital-assets/2025/07/17/unleash-the-next-wave-4-trillion-crypto-braces-for-big-price-catalyst-as-bitcoin-ethereum-and-xrp-soar/
[3] Bitcoin Suddenly Smashes Through $120,000 Price As Crypto Braces For A ‘Trillion Dollar’ Earthquake [Forbes] Historically, similar environments (such as during COVID) sparked sharp rallies in crypto as excess liquidity flowed into risk assets,” Nick Forster, founder of onchain options trading platform Derive.xyz, said in emailed comments. https://www.forbes.com/sites/digital-assets/2025/07/14/bitcoin-suddenly-smashes-through-120000-price-as-crypto-braces-for-a-massive-earthquake/
[4] Ether Prices Reach A Fresh, 6-Month High Near $3,700 [Forbes] The crypto derivatives expert also spoke to the impact of regulatory developments, as well as supply-demand dynamics. https://www.forbes.com/sites/digital-assets/2025/07/18/ether-prices-reach-a-fresh-6-month-high-near-3700/
[5] Is Bitcoin The Only Investable Crypto Asset? [Forbes] It would appear that investors who thought they were buying a portfolio of independent upside discovered they were actually underwriting a single risk factor: demand for speculative narrative and crypto hype. https://www.forbes.com/sites/davidbirnbaum/2025/07/18/is-bitcoin-the-only-investable-crypto-asset/
[6] Peter Thiel-backed cryptocurrency exchange Bullish files to go public on NYSE [CNBC] The filing is another significant step for the cryptocurrency industry, which has fought for years to convince institutions to embrace digital assets as legitimate investments. https://www.cnbc.com/2025/07/18/peter-thiel-backed-cryptocurrency-exchange-bullish-files-for-nyse-ipo.html