Our Thoughts on Blockchain & Cryptocurrencies

Our Thoughts on Blockchain & Cryptocurrencies

September 24, 2021 / in Economy & Investments /

The Blue Trust investment team believes blockchain technology will have tremendously invasive impacts on the future of consumers and businesses in many different and unpredictable ways. We do not dismiss or underestimate the potential for change due to this advancing technology. However, we do not believe cryptocurrencies as an asset class are mature enough to include in client portfolios at this time. While some investors may want to invest in crypto, we do not believe it is mainstream enough to include in our asset allocation.

Interest in digital assets varies. Not everyone is seeking the same thing. Some investors are attracted to the technological impacts (through smart contracts, etc.), while others are looking for a scarce asset that tempers central bank monetary largesse. In the world of cryptocurrencies, Bitcoin has found favor as a monetary alternative and store of value due to its decentralized and highly secure nature. Meanwhile, some investors have favored other more centralized coins because of their speed and efficiency in processing transactions. Investors should ask themselves two questions: Why am I investing in crypto? and what do I hope to experience?

Investors should view cryptocurrencies as speculative, fledgling assets with high risk and high return potential. Here are some facts to consider:

  • Only invest what you could afford to lose. If you follow that advice and account for the highly uncertain potential for a successful outcome, then you will size the position appropriately. This approach suggests that you keep the position size very small such that it wouldn’t have a big impact on your net worth, even if it rocketed higher. For returns to have a material impact on your portfolio, you would have to include a position size that was irresponsible relative to the risk involved.
  • Right now, the market cap of all cryptocurrencies is approximately $2 trillion. Bitcoin is 40% of that ($900 billion), and Ethereum is 20% ($400 billion). So, two coins make up 60% of the market cap of all crypto while thousands of other coins come and go.1 Comparatively, gold has a market cap of $11 trillion—five times the size of the entire crypto market and eight times the size of Bitcoin and Ethereum together.2 You can look at how much gold you have in your portfolio and divide it by eight to calculate your market cap weight for crypto.
  • Custody is also an issue with crypto. Depending on why you’re owning it—for speculation or as an alternative to fiat currency—will dictate what makes sense.
  • The crypto sphere is nascent. Because the technology landscape is so quickly evolving, the technology, use cases, and regulation are quickly changing and unpredictable at this point.

If you have additional questions, please reach out to your Blue Trust advisor or contact us at 800.987.2987 or email blog@bluetrust.com.

1Source: coinmarketcap.com. 9/23/2021
2Source: gold.org. 9/23/2021


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