Crypto Quarterly – Vol. 3, Oct 2022

In this issue of TGIF 2 Minutes – Crypto Quarterly, a less rosy update with the bright spot being that fees to trade crypto have gone to “free” in some cases. Binance, a world leader in Bitcoin trading volume, introduced zero-fee trading back in June. (Note that as recently as July 2022, the “CEO” of Binance still says there is no headquarters for the company, as it is “decentralized”.)

Value-wise, in a year that has been unkind to stocks AND bonds, Crypto stands out as an even bigger loser relative to traditional asset classes – by over double in a number of cases. Take for example the price of Bitcoin which started the year at approximately $46,310 as measured in US Dollars. Most recent prices of Bitcoin are around $20,098, or down over 55%. Coinbase, not a cryptocurrency but a crypto trading marketplace (among other technology functions), went public in April 2021 and is down around 78% since then. Compare these crypto-related price declines to the painful year-to-date performance of -21% in the S&P 500, -29% in the Nasdaq and -21.5% in the Russell 2000 which tracks small company stocks.

Interestingly, The Wall Street Journal recently reported the goal amongst certain wealthy, high-risk tolerant crypto investors being more about the “mission” of crypto versus making money.* In my 35 years in the investment industry I have not been familiar with investors not wanting to make money. Although there may be uber-wealthy, famous investors who have gone on at great risk and without regard to cost to pioneer new investment methods over the decades. Closer to reality, the average – and above-average in the case of my clients – investor has as his or her goal to make money while accomplishing lifestyle goals. In addition, my goal as a fiduciary and trusted adviser is to generate positive returns for clients.

Where does this leave investors who are still wondering whether or not to add cryptocurrency to a diversified portfolio? Liquidity and access-wise, crypto is still nowhere near the transparency of traditional stock, bond, cash, and real estate asset classes. Critical: for those saving for specific goals with near- and intermediate-term time horizons (meaning goals within the next two to five years) crypto seems unreliable at best. Certainly, for those with low-to-medium risk tolerance, crypto is off the list. Alternatively, for the high-risk tolerant, longer-term investor (meaning for goals in the 10+ year time frame) crypto investing may be worth a look.

Year-to-date since the “Crypto Super Bowl” in February 2022, investors who bypassed crypto investing have missed nearly nothing. Stay tuned; the future will tell the story on digital currencies.

In the meantime, investors with traditional portfolios (read: stocks, bonds, cash) coupled with patience, a healthy savings plan, cash on hand, and time-tested advice can persevere even the worst market environments. Please reach out and stay in touch.

BUYING CRYPTOCURRENCIES IS EXTREMELY VOLATILE AND RISKY.

CRYPTO EXCHANGES, CRYPTOCURRENCIES AND THE BITCOIN ETF ARE **NOT** FDIC INSURED IN ANY WAY.

*Pia Singh, The Wall Street Journal, July 30, 2022. www.wsj.com (subscription needed).

The diagram above first appeared in a May 2019 edition of TGIF 2 Minutes to illustrate how payment methods have evolved from Cash ($, far-left) to newer and often more convenient forms such as credit cards (“CC” in the diagram above), then PayPal and Venmo (the “P” and “V”) and now digital forms such as Bitcoin (the “B”, far-right on the diagram). The world has rapidly gone digital in hundreds of ways including social and money.

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