Bitcoin, the best known cryptocurrency, had a rough time in February 2020. At one point it shed about 10% of its value in three days against a backdrop of growing unease about the potential severity of a global coronavirus outbreak — a fear that infected stocks as well, dragging the S&P 500 down about 12% for the month.
Alternative.me, which tracks investor sentiment around crypto currencies in broad terms, says the fear-and-greed pendulum was stuck in the “fear” zone through the last half of the month after an ebullient first half.
For Bitcoin and the crypto-asset space generally, this slide came at an awkward moment. Just weeks earlier, with some strong returns for the nascent asset class in 2019, the financial press was abuzz with talk of crypto’s growing acceptance among investors and — rather more grudgingly — financial advisors.
In a January 2020 survey of 415 financial advisors, ETF Trends and crypto index maker Bitwise said 9% of RIA-based advisors (and 6% of financial advisors overall) already allocate a portion of their clients’ money to crypto assets — and none of them (statistically at least) plan to par these positions back in 2020. Further, the report’s sponsors expect 13% of financial advisors will manage crypto holding by the end of this year.
But for advisors, the most important takeaway from the ETF Trends/Bitwise report is not whether or not cryptocurrencies are safe or smart or popular, but that retail investors are asking about them. Over three-quarters of the advisors surveyed, 76%, said clients had inquired about crypto assets in 2019. A like percentage of those surveyed, 72%, think their clients are making side bets with crypto and not telling their advisors.
What Are Crypto Assets, and Why Should You Care About Them?
Financial advisors like you should care about cryptocurrencies because some of your clients do. No one is suggesting you join the herd let alone lead a stampede. But being ready, willing and able to educate clients on Bitcoin and the like means you can provide better advice on such assets, whether it be in terms of avoiding them or keeping allocations at reasonable levels.
The history of digital currencies may be a bit longer than some realize. Back in the late-nineties dotcom craze, digital currencies were a bit of a rage. Remember Beenz? How about DigiCash? Flooz? While some of these names may have rolled off the memory heap, you’re bound to know PayPal, a company that started out in that pack and made it through to its present status as a household name. PayPal aside, the notion of internet-bound cash systems lost its attraction after the dotcom meltdown in 2000.
That chill lasted until early 2009. In the darkest days of the financial crisis, a person or a group going by the name “Satoshi Nakamoto” unfurled Bitcoin, a decentralized “peer-to-peer electronic cash system.”
Unlike its dotcom forebears, Bitcoin relies not on “trusted third parties” to verify transactions, but on a system for cryptology called “blockchain.” Wikipedia defines blockchain as “a decentralized, distributed, and oftentimes public, digital ledger that is used to record transactions across many computers so that any involved record cannot be altered retroactively, without the alteration of all subsequent blocks.”
Although Bitcoin is practically synonymous with cryptocurrency, other more or less big names in the space include Ethereum, Litecoin, Iota, Ripple, EOS, NEO, Cardano and Bitcoin Cash, a split-off from Bitcoin that concentrates on Bitcoin “mining.”
How Do People Make Money In Cryptocurrency?
For an answer to this question, look no further than about a thousand interchangeable websites, blogs and articles. We chose IncomeNinjas, mainly for the name. It delineates more than a dozen ways to make bank with crypto, not including working for one. Here are the top five.