Bitcoin, Cryptocurrency & What It Means For Financial Advisors

Big brokerage houses, primary dealers and news media have begun to report on Bitcoin. For Bitcoin maximalists out there, this is a long time coming. For some, it’s a “that’s cool” type of development and for many… they haven’t even noticed.

At Longevity Achieved, we are a new breed of broker. This requires ways of being and acting that aren’t industry standard. We are insatiably curious – not just for what’s happening in our client’s lives, but we are constantly forward-looking, discovering that which could help our clients have their life “achieved”.

So let’s take a quick look at what Bitcoin is, why it’s valuable, and why the new breed needs to stay abreast of this new asset class.

What is Bitcoin?

Bitcoin is a digital currency that is not issued by any central authority like fiat money such as the Canadian Dollar, US Dollar, Japanese Yen, Swiss Franc, et al…. It was created anonymously by Satoshi Nakamoto, a pseudonym for some person or entity. There are no physical Bitcoins; it is entirely digital and balances are kept on a public ledger built on blockchain technology. 

Why is it valuable?

Throughout the course of history money has taken different forms from sand, to seashells, to wooden sticks and to the more modern times of digital numbers on a computer screen. Aristotle, Greek philosopher and student of Plato, was a fan of money – he knew that there could be a medium of exchange that would represent the value of literally anything that could be measured in space and time. He determined that for money to be useful, it ought to be durable, portable, divisible and intrinsically valuable.

It turns out that Bitcoin fits these traits extremely well. Bitcoin is highly durable and it cannot be destroyed – yes, Bitcoin can be lost – however it cannot be destroyed. Bitcoin is also highly portable, in fact you can transact with people across the world and in various jurisdictions with ease. Bitcoin is also highly divisible.

One (1) bitcoin can be divisible up to eight (8) decimal points [0.00000001 is called a “Satoshi” – this would allow for quadrillions of individual units of Satoshis to be distributed throughout the economy world wide].

When it comes to intrinsic value – some would argue that Bitcoin is merely a digital currency, backed by nothing and made of fairy dust. This argument is trumped by the fact that it requires REAL energy and labour output to create a Bitcoin – just like it requires REAL energy and labour output to mine gold out of the ground. Assuming real energy, labour output, and scarcity give something an intrinsic value – then Bitcoin definitely fits the bill.

And now, even if these traits of money that Bitcoin arguably represents very well are disproved,  Bitcoin is still being talked about and touted about by big brokerage houses, primary dealers and news media. 

Why should you be abreast of this new asset class?

People Are Building Wealth With It

I’m sure you’ve sat down with a client and hopefully, if you’ve done your job right, they’ve given you the world of what their life achieved looks like. More often than not it’s filled with visions of grandeur…to live in a foreign country…buy a cottage…pay for their child’s education… In other words, a lot of that conversation looks like building wealth to achieve a goal.

Anyone who invested in Bitcoin for the past 10 years has done extremely well and there are no signs showing that this trend is going to stop anytime soon. Institutional research has already shown that adding just 1% of your portfolio into Bitcoin from 2015 to 2020 would have boosted your average annual returns by 1.36%. A 5% allocation of Bitcoin in your portfolio would have boosted your average annual returns by 7.24%. All without a significant increase in risk!

You owe it to your clients to keep them abreast of opportunities that can build their wealth. 

Institutional Adoption

We’ve seen companies like Square, Paypal, Tesla, Overstock, Microstrategy announce purchase of Bitcoin for their treasury reserve assets. In other words, institutions are saying; “Hey, you know what? It makes sense to turn some of our FIAT currency into Bitcoin.” This is an indication that institutions are perceiving Bitcoin as a storer of value. Media companies like Bloomberg are reporting on Bitcoin, and financial institutions like JP Morgan are creating cryptocurrency debt instruments tied to companies that are directly or indirectly related to cryptocurrencies or other digital assets.

You Are A Trusted Advisor

As a new breed of broker, you are committed to being a trusted advisor to your clients. One way to do that is to be credible, professional and trustworthy. Nothing builds that kind of relationship more than providing your clients with the knowledge they need – not to simply sell a product – but because it would make a difference for them.

Imagine their delight, and yours, as you share investment opportunities that you don’t necessarily profit from – simply because you thought it is in their best interest. Imagine.

Your client’s already know that you aren’t just in it to make a quick buck – they know you have their best interest at heart, you’re forward-looking. This is a chance to put your money where your mouth is.

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