Does Your Financial Advisor Speak Crypto?

It’s pretty much impossible to avoid frequent headlines declaring that Bitcoin or some other new cryptocurrency is the gold standard of the new world of digital assets. 

Nobody wants to miss out on a gold rush, but Bitcoin isn't gold, and neither are its rival protocols such as Ethereum, Solana, or FTX Exchange Token. 

However, just as with gold mining, crypto mining involves expending energy to acquire something that, depending on the coin's inflation schedule, may have finite availability.

As of March 2022, there were more than 12,000 cryptocurrencies that facilitate peer-to-peer transfers of data and value. 

Where does this leave the individual who believes in the future of these crypto-assets but can't figure out how to invest in them?

That's the question people have been asking about futures trading since the Dojima Rice Exchange opening in Japan in 1710. 

There are many factors to consider and plenty of good articles to educate yourself about the technology behind cryptocurrencies. But who can advise you on whether to buy in? 

Don’t expect any crypto buy, hold, or sell recommendations from your financial advisor. Even among investment advisors who like alternative assets that tend to move independently of the S&P 500 Index, you'll be hard-pressed to find many willing to suggest putting a chunk of your portfolio into any of the cryptocurrencies. Most wealth managers are steering clear for two reasons.

First, because they mostly see this rush as just another new fad in the financial space that has to play itself out before there can be any real guidance.  Second, it is a space that has no clear regulators yet,but does have some who hate all cryptocurrencies when sold to retail customers.

With so many cryptocurrencies and the game-like nature of obtaining them, plenty of individual investors want to jump in. But make no mistake: cryptocurrencies may be thrilling but putting your money in a new financial product without any real understanding of how it works really is gambling.

One Boston-based financial advisor notes that when clients ask how they can invest in crypto, for example, it's often because they've heard how much money they could make. 

The problem with this way of thinking, the advisor explains, is that cryptocurrencies are so risky that investing in them right now is essentially gambling. 

A better way to think about cryptocurrencies is to focus on the technology behind them: the blockchain. The blockchain is more or less a distributed ledger. 

Bitcoin is the most well-known cryptocurrency because it was the first viable one. Then it began trading around the globe.

Blockchain technology was originally developed with payment processing in mind, but in reality, there are a lot of truly solid potential uses for it. 

Some of the possibilities include digital identity, tokenization of data, data management, and secure audit trails.

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