Happy first day of June! The year is ripping right along and so are developments in the financial services industry. This isn’t anything new. One of things I love about my work is the constant change and the need to continually educate myself. It’s daily reading, industry conferences, and a never-ending stream of webinars. But it’s wonderful to learn new things and to challenge my understanding.
This brings me to the subject of bitcoin, the most well-known (and yet vastly misunderstood) member of the emerging investment category called “digital assets”. Bitcoin is a thing in and of itself, but also the “Kleenex” term describing the wide variety of so-called cryptocurrencies. I’ve written about bitcoin in the past and have generally dismissed the category as being too volatile and otherwise inappropriate for anything other than pure speculation.
Price action in recent months has only served to prove this point. The value of one bitcoin, again one of many digital coins out there, hit almost $65,000 in April, up from less than $7,000 a year prior. But only a few weeks later the price had dropped to the mid-$30,000’s. That’s huge volatility driven primarily by headlines and active traders who were mostly late to the party. I imagine buying at recent highs, as many did, felt something like finding yourself at the apex of a rollercoaster just before your stomach rises to your throat.
But amid all the news and noise the powers that be, across government and a variety of industries, are taking digital assets and the blockchain technology that underpins them seriously. Part of this is a reaction to what’s happening in the markets, of course. Another part is a slow but steady institutional recognition that this technology could lead to a lot more than just digital currencies. Some even talk of it changing the world. Eventually.
My relationship to all this is evolving. Some months ago I made the decision to start going down the digital assets rabbit hole in a more meaningful way. I quickly realized just how superficial my knowledge was. I was looking for deep understanding, but my research began to feel scattered. I found myself studying the nature of money, world history, and navigating all sorts of diverse territory in trying to understand bitcoin. I longed for a structured course, something that would help tie the seemingly disparate information together.
Then boom, I got an unexpected invite via my professional organization, NAPFA, for a new course on you guessed it, all things digital assets. There was serendipity in the air and another sign of “crypto” going mainstream. (That’s the driving force behind the name change to digital assets, by the way.) It would be a 13-hour course taught by experts including one of the two guys who actually invented blockchain technology back in the 90’s, and cover everything a financial planner needs to know, from the super-technical stuff to incorporating digital assets into a portfolio.
I’m mid-way through the course and honestly can’t say where it will lead. Each module is full of brand-new information and often creates additional research. Bitcoin and the thousands of competing coins, blockchain technology itself, “trading” coins and tokens, concerns about global central bank policies and inflation, the potential rise of so-called decentralized finance, and use cases for non-financial companies and individuals alike; all this and more is exciting but still unresolved in my mind. Frankly, it also seems unresolved in the minds of people who are actively trying to figure it all out. It’s the modern Wild West in many ways. Nevertheless it seems clear that blockchain technology will prove revolutionary, we just don’t know exactly how yet.
But a huge open question is what, if anything, should individuals, bystanders if you will, do about it. Figuring this out at the portfolio level is difficult to say the least. I still haven’t decided how much bitcoin is the right amount and even where or how best to hold it. It may turn out to be investible for some of you and not others.
Many questions remain and I’m working diligently to find answers as I also confront my preconceived notions about digital assets. I want to be a good resource for you, even if it’s just providing information so I’ll plan to write a few more of these posts as I continue down the rabbit hole.
For now, here’s a link to some articles and other information from the organization that’s putting on the course. There’s a good list of articles to scan through if you’re interested. Keep in mind the content is geared toward financial folks, so there’s some jargon mixed in.
Have questions? Ask me. I can help.
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