The Risk is Not Discussing Bitcoin
Bitcoin has moved from the fringes of finance into the mainstream conversation among institutions, product providers, and increasingly among professional advisers. In a recent discussion on The Bitcoin IFA podcast, TBA Founding Partner Peter Dunworth outlined how this shift is unfolding, why traditional retirement products face structural pressure, and how advisers can responsibly introduce clients to the asset - especially during a prolonged bear market. The conversation highlights three interlocking themes: Bitcoin’s growing acceptance inside traditional finance and the corresponding vulnerability of pensions and annuities; the complementary roles of ETFs and self-custody in expanding overall participation; and the practical challenges of onboarding new clients amid price declines and persistent fear, uncertainty, and doubt.
Bitcoin’s Rise in Traditional Finance and the Threat to Pensions and Annuities
Over the past year or so, Bitcoin has become more deeply embedded in conventional financial infrastructure. Spot Bitcoin ETFs, now more than two years old in the United States, have delivered measurable results for the large firms that launched them. What is more striking is the change in attitude among institutions that previously dismissed the asset as too risky or lacking value. Many of those same firms are now creating products designed to capture aspects of the Bitcoin ecosystem. BlackRock’s recent income-oriented offering is one example: it aims to deliver a portion of Bitcoin’s upside while generating targeted annual income in the 10–25% range by monetizing volatility. Similar products from other issuers seek to turn Bitcoin’s price swings into cash-flow streams that traditional portfolios struggle to match.
This institutional embrace matters because it legitimizes the asset for a broader audience of advisers and clients. Yet the same conversation reveals why conventional retirement vehicles are under strain. Annuities, pensions, and many insurance products are often required by regulation to hold substantial allocations of government bonds. Those bonds have suffered real-value erosion from inflation. Official figures may cite 2–3% inflation, but everyday price increases - particularly for food and essentials - frequently run closer to double digits. In that environment, bonds yielding under 5% across much of Western Europe (and only modestly higher in parts of the U.S. government curve) fail to preserve purchasing power. Simple arithmetic illustrates the problem: if a real break-even return after inflation and taxes approaches 15%, a 5% bond yield leaves a persistent shortfall. Over roughly seven years that shortfall can cut the real value of the underlying capital in half.
Pete describes these mandated holdings as an “anchor” on performance. Providers must generate required payouts while locked into underperforming assets whose cash flows look increasingly fragile. Superannuation systems and similar schemes face the same tension. Without a hedge against currency debasement, the long-term sustainability of these products is questionable. Bitcoin and the income products now being built around its volatility are positioned by advocates as one potential offset - an asset outside the traditional system that can provide both capital appreciation and, in certain structured forms, income. Whether clients or advisers fully recognize the exposure yet, the structural mismatch between bond yields and real inflation creates a growing need for alternatives.
ETFs Versus Self-Custody: Expanding the Overall Opportunity
A common early concern among Bitcoin holders was that exchange-traded funds would divert demand away from direct ownership and self-custody. Pete’s view is more constructive: ETFs grow the total pie. By bringing Bitcoin inside regulated vehicles managed by the world’s largest asset managers, ETFs introduce the asset to investors who would never navigate seed phrases, hardware wallets, or on-chain transactions. Regulatory changes such as the repeal of SAB 121 further eased bank custody, removing another barrier. The result is broader societal acceptance and a larger pool of capital and attention.
That expansion does not eliminate the case for self-custody; it can strengthen it. Many people first encounter Bitcoin through an ETF or similar product. Some later choose to move further along the learning curve toward direct ownership once they understand the difference between a paper claim and holding the underlying asset. Self-custody remains the purest expression of Bitcoin’s design - permissionless ownership outside intermediary balance sheets - but it is not suitable for everyone. Clients who are functionally unable or unwilling to manage technical details still benefit from professional exposure via ETFs. Meeting people where they are expands participation without forcing a binary choice.
Recent events underscore why operational security remains critical for those who do self-custody. The Coldcard hardware-wallet incident, in which a software update compromised the random-number generator used to create seed phrases, led to substantial losses for users who had followed community best practices. The failure was not in Bitcoin itself - the network continued to function as designed - but in a single point of reliance on one device manufacturer’s entropy. The episode reinforces the importance of multi-signature setups, multiple hardware providers, and processes that eliminate any single point of failure. Firms specializing in client self-custody increasingly emphasize diversified entropy sources and geographic distribution of keys precisely to avoid such concentration risk. ETFs and carefully engineered self-custody solutions therefore serve complementary roles: one lowers the barrier to entry, the other offers maximal sovereignty for those prepared to assume the responsibility.
Onboarding Clients in a Bear Market and Countering FUD
Price action remains the dominant psychological factor for many clients. Bitcoin’s decline from highs near $126,000 to levels around $60,000 represents a drawdown of roughly 50% and places the market roughly eleven months into what historically have been 12 to 18-month bear phases. Volatility has not disappeared; a 50% move is still material even if the asset’s longer-term volatility profile has moderated. Advisers who have held Bitcoin for clients since 2016 have navigated larger percentage declines in earlier cycles and therefore bring experienced perspective.
The practical approach to new clients begins with expectation management. Most people arriving at Bitcoin for the first time are under-allocated relative to the asset’s potential role. Pete typically aims for an eventual 10% portfolio weight, yet first allocations are almost always smaller, often 2-5%, because the absolute sums feel large. Clients are told explicitly that the position can fall sharply shortly after purchase. Framing that possibility as an opportunity to dollar-cost average at lower prices, rather than a reason for panic, prepares them psychologically. The goal is to position clients so that a decline is seen as a chance to increase exposure while the fundamental case remains intact.
Cycle analysis, informed by on-chain and market data from specialists, currently points toward a bottoming process. Whether the next phase is sideways consolidation for several months or an earlier recovery is uncertain, but historical patterns and indicator sets suggest the risk-reward for new capital has improved. Dollar-cost averaging over the coming months is presented as a disciplined response rather than an attempt at precise timing.
Fear, uncertainty, and doubt are addressed by first understanding the client. Asking about their best and worst prior investments reveals risk tolerance, emotional triggers, and mental models. Bitcoin can then be framed in language that resonates: for a successful property investor it may be described as digital property with superior scarcity and portability; for an equity investor it may be positioned as a form of digital ownership with attributes unavailable in traditional shares. The conversation focuses on why Bitcoin does not share the characteristics of the client’s worst experiences and why its properties align with their better ones. This client-centered method is more effective than abstract debates about “Ponzi” claims or utility arguments.
Importantly, the professional calculus for advisers has inverted. A few years ago, discussing Bitcoin carried reputational or regulatory risk. Today the greater risk is inability to discuss it knowledgeably when clients raise the topic - or when structural weaknesses in traditional portfolios become more apparent. Even a modest initial allocation can serve as an educational sandbox. If the position performs strongly over subsequent years, it naturally prompts conversations about rebalancing and potentially higher target weights. Advisers who develop competence in the subject differentiate themselves and equip clients with a genuine diversifier outside the conventional system of bonds, equities, property, and commodities.
Bitcoin’s path into traditional finance is neither complete nor risk-free. Volatility persists, operational failures in custody solutions still occur, and price cycles continue to test conviction. At the same time, institutional product development, regulatory accommodation, and the mathematical pressures on bond-heavy retirement vehicles are creating durable demand for alternatives. ETFs and self-custody expand access in different ways; careful onboarding and honest discussion of risks convert scepticism into informed allocation. For advisers willing to engage, the asset class is no longer an optional curiosity but an increasingly relevant component of prudent portfolio construction.
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