Nick Neumann is the CEO of home, a secure way for wealthy individuals to store their bitcoins. Here he shares his thoughts on what he thinks financial advisors need to know about Bitcoin.
Nick Neuman, CEO and Co-Founder, Casa
Bitcoin is the punk rock of money. It’s bold, it’s breaking the rules, and the financial establishment doesn’t like it a bit. And like punk, Bitcoin has strong do-it-yourself ethics, especially when it comes to education. You can see why personal financial advisors (PFAs) might be cautious about getting involved in this revolution, especially if they feel they are neither needed nor wanted.
In fact, the opposite is true. Financial advisors are badly needed in the world of cryptocurrency investing, which is moving so fast it is hard to keep up and easy to make mistakes. Without the right advice, these ignorant enthusiasts risk making a catastrophic mistake, either in the way they invest or how they protect their coins.
If financial advisors are ahead of the curve and can show that they are meeting the needs of their clients in this new world, then they will play a vital role in Bitcoin’s development and stand out from their slower competitors.
The bitcoin moment
Why bother learning about Bitcoin in the first place? Surely it’s just a fad whose moment in the sun after her postElon Musk overthrow?
Forget that Bitcoin was written down many times in its short lifespan before returning to new heights; ignore the fact that Bitcoin is still trading higher than it was at the turn of the year. Because an obsession with short-term ups and downs is a beginner’s mistake – precisely the kind of mistakes financial advisers are great at helping clients avoid.
In reality, Bitcoin has never been stronger, thanks to the significant reduction in risk over the past 18 months or so. There are several factors that made it an investment. First, there is acceptance by large institutions: not just risk-taking visionaries like Tesla, but also deeply conservative financial actors like Mass mutual and other insurers.
Second, once an asset class exceeds $ 1 trillion – as Bitcoin did earlier this year – it becomes large enough for large players to make significant investments without moving the market. That liquidity is often a requirement for institutional investors, and now Bitcoin has hit that mark. Meanwhile listed companies like MicroStrategy, Coinbase, Square and many others are switching their corporate coffers to Bitcoin, making it increasingly difficult for regulators and central banks to restrict access to Bitcoin, as many feared earlier in Bitcoin life.
Finally, there is the looming specter of inflation. Consumers don’t have to read them Wall Street Journal knowing that inflation has risen to its highest level since 2008 is what you see every day at the gas station or in the grocery store. So while the Fed is talking about raising interest rates, many ordinary people are preparing for this unprecedented era of low inflation to come to an end.
For everyone from institutions to ordinary savers, the bitcoin moment is right now. This also applies to PFAs; In fact, the world needs your expertise more than ever.
The naysayers are right about one thing: the overcrowded cryptocurrency market is a bubble. As with the tech boom of the late last century, there are a multitude of competing coins – most of them grossly overpriced and forgotten, but not until they have taken their investors’ money with them.
Because of this, we need smart, self-taught PFAs to deter investors from making bad decisions and to help them make the Amazons of the Altavistas. We don’t want PFAs to be evangelists for Bitcoin or any other cryptocurrency; Activists make bad advisors. However, we hope that you will take the time to develop an understanding of Bitcoin’s technology and philosophy and understand why so many people are investing in digital gold to secure their wealth.
The first duty of any PFA is to be able to tell their clients how an asset has performed over time and provide an indication of the likelihood that that performance will be replicated in the future. Let’s be completely honest: Bitcoin isn’t going to be as safe a bet as it is General Motors Stock anytime soon. However, only by understanding broader economic and market trends can PFAs provide their customers with knowledgeable and informed advice about the risks and rewards of investing in Bitcoin.
But it is not enough to understand the economic argument. Bitcoin represents a digital revolution of money, and that requires a certain amount of technical knowledge. Because while stocks can lose their value, bitcoiners are prone to losing their entire investment through theft or fraud. Financial advisors therefore need to know at least a little bit about these risks and how investors can protect themselves against them – for example by effectively protecting their cryptographic keys.
This technical knowledge pays off. The more you learn about the technical aspects of Bitcoin and the blockchain, the sooner you will realize that Bitcoin’s long-term value is determined by the ever-growing utility it offers for a range of financial, business, and consumer applications.
Developments like this are driving the Bitcoin revolution, which will take place with or without PFA involvement. But it would be so much better for everyone if financial advisors dig into and learn about Bitcoin. Without their impartial expertise, we will see more investors following celebrities and other false prophets and investing more than they can afford in things they don’t understand.