In recent months, we’ve seen a growing number of clients express interest in digital currencies, and for good reason. Headlines about regulatory shifts, evolving technology, and political tailwinds have sparked questions about whether cryptocurrencies have a place in diversified investment portfolios. Notably, the incoming Trump administration’s supportive tone on digital assets has amplified this curiosity.
At Alaska Wealth Advisors, we approach emerging trends with both an open mind and a critical lens. Our investment team has been actively researching the evolution of blockchain technology, the structure of digital currencies, and their implications for long-term, risk-managed portfolios. Drawing on thought leadership from the CFA Institute, CAIA Association, and other institutional research bodies, we are developing a disciplined view of this rapidly changing space.
The Foundations: What Are Digital Currencies?
At the core of digital currencies is blockchain technology, a decentralized, tamper-resistant ledger that records transactions securely and transparently. While blockchain’s origins can be traced to the 1980s, it was Bitcoin’s launch during the 2009 financial crisis that catalyzed mainstream awareness of decentralized monetary systems.
Blockchain networks use consensus mechanisms like Proof of Work (PoW) and Proof of Stake (PoS) to validate transactions and ensure the system’s integrity. These mechanisms address the “double-spending problem”—the risk of a digital asset being spent more than once due to its replicable nature.
This innovation brings potential benefits, including:
- Transparency through open-source protocols
- Reduced transaction costs via disintermediation
- Operational efficiency in certain financial applications
The Investment Case: Opportunities and Headwinds
Digital assets are still in their infancy as an investable asset class. They offer intriguing possibilities—but not without considerable risk.
Potential Benefits
- Diversification: Cryptocurrencies have historically shown low correlations with traditional assets, which may improve risk-adjusted returns in select portfolios.
- Inflation Hedge: Bitcoin is frequently likened to “digital gold,” touted by some as a potential inflation-resistant asset, though empirical support is still mixed.
Key Risks
- Regulatory Uncertainty: The legal framework governing digital assets is still forming. Shifting regulations pose material risks, particularly in the areas of compliance and tax treatment.
- Custody & Security: Safeguarding digital holdings involves complex logistics, including secure storage of private keys and vetting of counterparties.
- Volatility: Price swings in cryptocurrencies remain significant, creating challenges for fiduciaries seeking to preserve capital and manage downside risk.
Fiduciary Lens: Caution Before Allocation
As fiduciaries, we must weigh not only potential return, but also transparency, liquidity, and suitability. The CFA Institute emphasizes that investing in highly speculative instruments without a clear value thesis or regulatory structure may not meet the standard of prudent portfolio management.
While digital assets continue to evolve, most lack the robust analytical foundation or institutional safeguards necessary for broad adoption in portfolios governed by fiduciary duty.
Alaska Wealth Advisor’s Position: Educated, But Conservative
At this time, Alaska Wealth Advisors does not include digital assets in our investment portfolios. Our decision reflects:
- The absence of comprehensive regulation and custody options
- The speculative nature of many digital currencies
- Our investment philosophy which focuses on a rules based, quantitative approach to designing the mix of assets in each portfolio
That said, we remain committed to staying informed. Our investment team is actively engaged in ongoing education and monitoring of blockchain and digital asset developments, ensuring we are prepared to adapt should the landscape evolve to better align with our fiduciary principles.
In Closing
Digital currencies may ultimately play a role in shaping aspects of global finance. But for long-term investors, particularly those who rely on disciplined, rules based strategies, adoption must be guided by your specific financial goals, not headlines.
As stewards of your capital, Alaska Wealth Advisors will continue to explore innovation while maintaining our core commitment: building portfolios that serve your financial goals with integrity, rigor, and care.
Kirsten Halpin, CFA, CAIA, FRM
Director of Investments
The opinions expressed are those of Alaska Wealth Advisors, LLC. The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass. Forward-looking statements cannot be guaranteed.
Alaska Wealth Advisors, LLC is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about Alaska Wealth Advisors’ investment advisory services can be found in its Form ADV Part 2 and/or Form CRS, both of which are available upon request.
