More often than not, most of my client meetings and conversations with total strangers who become friends, involve a discussion of Bitcoin, Ethereum, or other forms of cryptocurrency. Fascinating as always, these discussions on cryptocurrency (from here out Crypto) often end in a regulatory roadblock. For the average person, delving into understanding crypto can be, well cryptic. This post isn't about the basics or history of crypto as there is a wealth of resources available to anyone interested; this post is about whether or not it is a good investment for a portfolio.
As with all articles this is not a specific recommendation to invest and if you choose to do so, it involves significant risk and should be undertaken with a better understanding of your specific risk appetite. However, this post will involve a general opinion of whether or not it's something to potentially invest in.
As a Financial Advisor, I owe it to pay it forward to all potential investors in helping them make prudent investment choices in their portfolios. I believe it's important to stay ahead of the bell curve of trends in the investment world as well as relying on fundamentals that have served so many well over time.
It's highly important to understand that crypto is a 100% digital currency that is (at the time of writing) unregulated by major governments. This lack of regulation is what appeals to many and why the returns that so many tout have been to extraordinary. But, like many unregulated or protected investments, more often than not, the stories of loss far outweigh the stories of gain. And the stories I have heard of those gaining small fortunes were the ones who "timed" their exit correctly and even have remorse on their exit as "too soon" due to the further running of their crypto holdings.
However, this does not mean it is a bad choice to be prudent and stay updated on timely news in the crypto world. When major news outlets like Bloomberg have reports on bitcoin and others, it means it is time for the layperson to keep a prudent eye on the next cryptocurrency. Allow me a moment to create a metaphor. When Myspace came out, it was a big phenomenon and drew many initial investors to it's web. Facebook was quick to enter the ring and be a major contender. At the time, no one had a crystal ball so it was uncertain as to whether Facebook or Myspace would be the "one" to be adopted my most. Here, 15 years later MySpace is a dinosaur and most youth have never heard of it. Facebook is still a well known platform and I personally, still use it as a tool to grow my business. However, now Facebook is losing to digital media that appeals to a younger and younger audience like Snapchat and Instagram. Correlations of digital phenomena such as the aforementioned can be drawn for crypto. Crypto appeals to a population that favors unregulated invesments. Other unregulated (or at the very least, less regulated) investment include things like Pink Sheets or Penny Stocks. There is no doubt people, to this day, are making fortunes in the Over The Counter stock market.
The penultimate choice of whether or not to invest in crypto comes from this train of logic. Until major regulation comes, and there are major governments and central banks that are investigating crypto as the future of currency. I postulate that one day, we will move further into this as a medium, but until the average person can be protected from fraud and other pitfalls, it is important to talk with someone you trust. Take baby steps in your understanding- everyone moves through life at their own pace and being patient and taking the time to understand it may pay dividends for your portfolio rather than jumping in to the next big crypto craze.
At Thomas Wilson & Co we are keeping a keen eye on the ever evolving environment of crypto as we see the benefits to position our clients and keep them ahead of the curve to capture an upside on the move towards a global currency that will most certainly involve a blockchain basis. As a Forbes article mentioned, "Blockchain won't solve everything, but it will certainly make things a lot easier for everyone." Given this, it is important to delve deeper into the companies and governments that are using it and investment accordingly. True value will be gained from investments that are timely, well researched, and diversified.
In an increasingly digital world, it is vastly important to make prudent decisions with the help of experts. There is no replacement for a face to face meeting with a trusted advisor.
To Further note some advantages of blockchain and crypto: It helps simplify business and personal life through Transparent transactions. Blockchain is cost effective, long gone are bank and ATM fees. Once a transaction is confirmed the transaction is recorded on a digital ledger forever. Given it's decentralization, the availability of blockchain is available to almost anyone with a smartphone.
Recently, I learned that Kenya leapfrogged the 20th century due to smartphone technology. The key lessons learned are that Kenya has a corrupt culture involving bribing; however, with the introduction of cell phones and online banking power has been returned to the people of Kenya allowing them simplified protection of their money. This has allowed more money in the pockets (banks) of the people! Kenya and Uganda are two countries, well positioned, for exponential growth due to their acceptance of technology. I am planning a trip to these countries to see for myself and I will write a post on my experience.
Correlations of how blockchain will affect citizens globally can be postulated from this case study. You could further postulate that investing in crypto would be like investing in a bank stock; perhaps it's more prudent to find the companies and banking systems that are using blockchain to move their business into the next few decades.
At Caelian Capital Strategies, we are excited for the changes that blockchain will bring and the potential growth in our clients portfolios by investing in the companies that are using it. Click here to schedule a meeting with us, whether by phone call, face to face, or online scroll down and select it on our calendar.
