Full Disclosure: this article is not about explaining cryptocurrencies, nor is it a beginners guide to crypto. This article is also NOT financial advice and should not be taken as financial advice for you or for anyone else. Admittedly, writing a blog about a specific investment isn’t easy to do without it coming off as financial advice, so I’m writing about crypto and how it relates to me and my family. This blog is NOT meant to be read in the future. Today is April 19th, 2024 and this is how Melissa and I stand on crypto today. Crypto markets do not close; crypto is ever evolving and will likely remain that way. All investments should be monitored, some more than others. If you’re thinking about investing in crypto, I highly recommend going to my website and booking a free call to talk about it.
Backstory: I’ve known about cryptocurrencies for 7-8 years now. Initially, I really only knew about Bitcoin and later Litecoin. Then came the explosion of ‘ridiculous’ coins such as Dogecoin and others. Somewhere NFTs entered the picture, then quickly got canceled. During this period, I spent time understanding cryptos, learning the pros and cons, and watching cryptos go UP and DOWN on a seemingly rollercoaster pace. And through it all, I have never invested in crypto, not one dollar. That is ending this week.
Why invest now? I really don’t know, and I know that’s not a great answer. I’ve thought about investing small amounts into crypto for years. Seeing the price of Bitcoin recently, yeah I should have invested in 2019, 2020, 2021 etc. but hindsight is always 20/20. Every time cryptos went sky high, I thought that I should have already invested. And then they’d crash down, and I’d be happy I stayed away. I’ve read articles about how crypto was going to take over the world (so far it hasn’t), then I’d read articles about how it was the dumbest investment ever (so far it isn’t). It’s been 7 years of inaction by me, and in those 7 years one thing has become clear:
If you’ve invested in Bitcoin at almost any point in time and you’ve held it to today, you’re up and likely you’re up over almost any other investment.
Are all Cryptos equal? NO. So far, the only crypto I believe in is Bitcoin. It’s the biggest, it’s seemingly the most stable, and it’s being used as a payment system in increasing areas of the world. Beyond that, I can’t really say why I trust Bitcoin so much as I can say I don’t trust any other coin. Like all crypto coins, Bitcoin has no value. There is no company (earnings) or governments (taxation) that props up its value. It’s decentralized which is both a good and bad thing, but there is no value other than the value that people assign to it by their willingness to buy/pay for it. It’s purely speculative and will stay that way for the foreseeable future.
“Tom, why are you buying something that has no underlying value?” This is the most important question, and I’ve said this for 15+ years before I ever became an advisor: I am willing to buy anything (that’s legal) if I believe I can sell it for more later. That goes for baseball cards, collectibles, concert tickets, stocks, houses, shoes, and yes, Bitcoin. As an advisor, if you come to me and tell me you really want to invest in something, you’ve done your research, and you can prove to me that you’re serious about it, I’m all ears.
“Tom, how do you defend this decision?” This is my most important answer: because financially Melissa and I can afford to take this risk. Investing in Bitcoin, or anything, is a risk. I know that. And Bitcoin is especially risky given that there is no underlying value behind it. When I buy stock, I own 1/1 millionth (or whatever) of that company. We can afford to take this risk because we’ve already obtained healthy levels of wealth (and stability) in tried and true investment vehicles: 401ks, IRAs, 529s for our kids, and we have positive equity in our home and cars. Our emergency fund is healthy and we even have iBonds. Secondly, we can afford to take this risk because we’re ONLY investing a small amount in Bitcoin. We’re planning to put 0.5% (so half of 1%) of our income into Bitcoin each year.
Like most investments, I really don’t like doing anything drastic, both in respect to speed and in amounts of money. I like trying things slowly and with small amounts of money, then adjusting as time goes on. I’ll never be an early adopter of anything. But how many CFP professionals out there are openly admitting that #1 they’ve never invested in crypto and #2 that they’re publicly announcing they’re doing it with their own money on such and such a day?
So how am I investing? I’m using a regulated exchange to buy an ETF that only holds Bitcoin. All of this will have a paper trail versus going out onto the Blockchain and buying it with an encrypted wallet. Why? Security, safety, and I prefer regulated markets. Our plan for now is to buy and hold small amounts of Bitcoin ETFs. The worst part about this is how volatile the currency is, which clashes with my general investment philosophy of buying and holding for long-term wealth. I’m going to be forced to follow Bitcoin and the ETF prices regularly. That part of my own individual investing is NOT fun. I don’t like spending time looking at the stock market on a regular basis and worrying about it. But here’s the catch: I think owning crypto is going to make me a better advisor. I’m going to be more clued into the crypto market and that will benefit my clients. I might not have a client ask me about crypto for weeks or months, but when they do I’ll have months of watchful eye data, and I’ll be ready to speak honestly with firsthand experience.
Summary Checklist:
This article is NOT financial advice
My views on crypto will change
I’ve never invested in any crypto before today
I currently do not believe in any crypto except for Bitcoin
You have to buy it, you have to hold it, and you have to hold it (or buy it) in a safe location
We’re only doing this because we can handle the risk
There is nothing to back this “investment” up
Crypto/Bitcoin is many things: a speculative investment, a gamble, a diversification
Crypto is both hands on and hands off at the same time and that kinda sucks
I hope you’ve found this post informative and enlightening. I hope it sparks a conversation between you and your friends or your family or your spouse about how you are handling your finances. If you’re like many people who are uncomfortable having those conversations, then maybe it’s time you look into hiring a professional to help you. You can book a free 30-minute call with me to test the waters and see if you’d even want to work with a CFP professional.
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