Cryptocurrencies and Digital Assets: the Good the Bad and the Scary
Recently our resident "Chief Crypto Officer," Doug Tees was asked to answer a few basic questions about the world of digital assets for the Washington Business Journal. The simplicity of his responses are a primer for understanding how to approach this new-ish topic in the world of finance and software.
Questions & Answers
- When a client asks what you think about cryptocurrency, what’s the first thing you say to them?
When a client asks about what I think about cryptocurrency, I like to try to get a better understanding of where they are coming from, what they have heard, and what their assumptions are. I tell them that the world of digital assets is expansive and includes everything from outright scams to speculative investments that have some real-world application. I am excited about the possibilities, but cautious about investing.
- Would you say you are more pro-crypto, anti-crypto, or neutral about it, and why?
I am more pro digital assets, but with some very large caveats. I believe that there are tremendous use cases for the technology and for applications – so I see a lot of potential. At the same time, there is little regulation or oversight which creates a great deal of risk. Any investments need to be taken carefully and with the full knowledge that the principal could be lost.
- Has your company hired any new staff experts on cryptocurrency? Or beefed up its expertise in other ways? If so, please elaborate:
In June 2021, I completed coursework for a Certificate in Blockchain and Digital Assets from the Digital Assets Council of Financial Professionals so that I could learn as much as possible. The coursework covered both the technology and financial application which provided a strong foundation for me to understand cryptocurrency as well as risks and potential opportunities. I continue to meet with vendors, read articles, and participate in webinars to keep current. I also seek out the naysayers to understand their concerns and positions. There are many intelligent and successful investors on both side of the discussion and it is important to learn from both.
- If someone wants to invest in cryptocurrency, what is your main ‘do’ and ‘don’t’ advice to them?
If someone wants to invest in cryptocurrency, there are several recommendations I make. First, and foremost, only invest what you can be comfortable losing. Investors should focus on security and expect a lot of volatility. This remains a speculative asset class and there are many things that can go wrong like technology failures, theft, or regulations moving against a crypto asset. Only invest in products where you can see value – not just popularity. If something is not creating value (like facilitating transactions, creating a marketplace, creating infrastructure for users, etc), then it is likely not built on substance and will likely fall. Also, there are no free rides. If a product is offering interest rates that are too good to be true, then it should set off alarm bells - and if you don’t understand what those risks are, then do not invest.
- Anything else you want to say about how to best manage this type of investment?
Investors need to be extremely careful in managing digital assets investments. From product selection, to storage location/type, to the eventual sale. Investors need to be on their guard since the protections we rely on for other investments and banking are not there. Regulators will not swoop in to shore up a failing cryptocurrency lending platform like they will a bank. There is often no one to call if you have an issue with your cryptocurrency – you are on your own. Finally, you have to be aware of how the IRS is treating these assets – primarily as property which means investors need to track purchase price, how long they hold, and every transaction they make to sell or exchange for a different asset. Otherwise, you could have a mess with the IRS.
For more information about crypto and digital assets, schedule a meeting with Doug here.
Jason Howell Company is an independent, family wealth management firm run by two owners who believe you should feel good about money.
Douglas W. Tees, MBA, CFP® and Jason J. Howell, CFP®, CPWA®, CSRIC® are each married to patient wives and are dedicated to their kids. Jason and Doug have built a firm with a great reputation. The firm is based in Northern Virginia but serves clients (virtually) all throughout the United States.
Our clients are “first generation wealth” and can feel guilty about how much they make and how much they spend compared to how they grew up. They are also concerned about how their wealth affects their sibling relationships and their kids.
We facilitate feeling "good about your money" in three ways:
- Family Governance: We walk the principles through a process that gets them talking about what it was like to grow up with money, how they pay bills and save today and what they want their family legacy to sound like. This turns into a “Family constitution.”
- Sustainable Investing: We match the values derived from the “Family Constitution” to a sustainable investing strategy that incorporates an adaptive efficient market theory with environmental, social and governance factors
- Proactive Philanthropy: Many of our clients will have a little extra, even after they achieve their family’s personal goals. We show them how much they can afford to be giving while living to the people and causes they care about
To feel good about your money, just book an introductory call here: Introductory Call