With the crypto market in freefall, hundreds of financial advisors joined Ric Edelman for what he billed as an “urgent” online dose of reality regarding their cypto holdings and what they should tell be telling clients.
Edelman, founder of the Digital Assets Council of Financial Professionals, told advisors on Monday during a webinar that it’s critical that they put cryptocurrencies in context. Yes, bitcoin has fallen some 70% since the beginning of the year, but it is up seven-fold since 2018, the advisor guru said.
“You wouldn't sell Nasdaq even though it’s crashing. So, you own bitcoin for the same reason you own Nasdaq,” Edelman said.
“I don’t hear anyone telling investors they can’t put Netflix in a 401(k),” he said. Netflix’s biggest one-month decline was 53% in November 2021 compared to bitcoin’s 42% biggest one-month decline in June.
Other stocks, such as Peloton, Carvana and FuboTV, have had greater one-year declines than bitcoin, Edelman said. Peloton and Carvana have both suffered 91% losses, while the price of FuboTV shares plummeted 90%.
“I’m willing to bet that your clients who own bitcoin have lost more money on Facebook,” added Edelman, who recommended that advisors and investors hold no more than 1% of their assets in crypto.
For those who did lose big on bitcoin and ethereum, Edelman reminded advisors that cryptos are not securities and thus not subject to wash sale rules. That means investors can sell their losing cryptos, harvest the losses for tax purposes and rebuy bitcoin and ethereum immediately, without waiting 30 days to repurchase.
As for blockchain and decentralized finance going away, Edelman reminded advisors that Uniswap, a decentralized platform that facilitates investor to investor trading without any centralized third party, is now larger than the New York Stock Exchange.
Mastercard’s CEO recently warned that the SWIFT system would not exist in five years and would be replaced by blockchain technology, Edelman said.
JPMorgan has begun using blockchain for transactions and both Fidelity and Citigroup have hired thousands of workers to take full advantage of blockchain technology and cryptocurrency opportunities, Edelman said.