Crypto Revisited

By Gary Silverman, CFP®

If you are a fan of cryptocurrencies, know what hot and cold wallets are, and have one or more of these already, then this isn’t your article (though there are some tidbits you might be interested in).

If you think Bitcoin and other cryptocurrencies are a bunch of scam-laden hogwash that are only good for getting your hopes up before dashing your dreams which you know you’ll never touch, likewise this article isn’t for you.

But if you are on the crypto sidelines and have wanted to dip your toes into the miraculous waters (or sludge depending on your viewpoint), read on!

Since those still reading are (likely) not following crypto closely, there has been a huge development in the ease of investing in these things. Eleven new ETFs (exchange-traded funds) have come out with some big names behind them like Fidelity, iShares, and Blackrock—and I’m sure many more will be coming.

Unlike some earlier crypto ETFs that “sort-of” invested in crypto, these take your money and directly buy Bitcoin. Thus, these new ETFs should follow the stellar rise (or stomach-churning fall) exactly as it happens.

By using ETFs instead of doing the direct investing yourself, you eliminate having to do all the wallet stuff and that ever-present risk of losing an unrecoverable password.

Of course, you still get a speculative “investment” that’s about four times bouncier than the stock market. The elation of seeing gains of 302% and 160% in 2020 and 2023 respectively was tempered by losses of more than 70% and 80% in 2018 and 2022. That the SEC (Securities and Exchange Commission) is shouting warnings to potential investors in this space is an understatement.

We all have friends who have seen total returns over the last decade in their crypto wallet of 2,500% or more. But that is for an “investment” that isn’t a profit-making company like Apple or Proctor & Gamble, nor is it a physical asset, like land or gold.

So, is Bitcoin and the other cryptocurrencies the right investment for you? I haven’t the foggiest idea.

For crypto advocates, the answer may be an unequivocal yes! If they got in early enough and hung in long enough, even a small slice of those 2,500% gains is a nice haul. Yet their gains from early on might be more profit from selling to the greater fool than anything fundamentally valuable being created. Personally, I have less than 1% of my money in crypto. It’s enough to make me happy if it goes up but not too sad if it ends up worthless. For me it’s like buying a lottery ticket. I dream of riches but when I’m awake I know the odds aren’t with me.

Am I right or are the crypto proponents the ones who will laugh at me as they take their winnings to the bank? Only time will tell.