Washington Business Journal asked investment experts what they really think about cryptocurrency
Cryptocurrency is virtually impossible to ignore, even if you have no idea what it is or how it works. From bitcoin to blockchain to NFTs, the buzz around digital assets is loud — with trillions of dollars at stake. Heck, this year’s Super Bowl even featured four different crypto commercials. The first thing you should understand is it’s not really a “currency” so much as a type of asset or investment tool. Also, there are several different types of cryptocurrency today:
Payment tokens: These pay for goods and services and make up the majority of cryptocurrencies. Examples: Bitcoin, Ethereum, Monero, Dogecoin Utility tokens: Think of these as vouchers made for specific platforms and used to gain access to them. Examples: golem, FunFair, Sirin Labs Security tokens: These are securitized by financial regulation and get their value from external assets like equity, real estate or other commodities. Examples: Bcap, Sia Funds
Exchange tokens: These are used primarily in crypto marketplaces for buying and swapping tokens. Examples: Gemini USD, FTX Coin, Shushi Non-fungible tokens: Also called NFTs for short, each one of these has a unique identity and limited issuance making it hard to replicate. Examples: Original works of art, photos, GIFs and videos
But what do Greater Washington’s investment experts really think about cryptocurrency?
We reached out to the wealth management firms we survey for our List, and the responses we got from seven professionals ranged from staunchly against it as too risky, to neutral, to enthusiastic support. But one thing was clear regardless of where our experts stood: Proceed with caution.
“Only buy as much as you can afford to lose,” said Yusuf Abugideiri, a partner and senior financial planner with Yeske Buie.
Jay Amitkumar Mehta, a staff auditor in Citrin Cooperman’s India office, described himself as “pro-crypto,” but also captured why many are skeptical of it — it’s new, he said, and they don’t understand it.
“There are lot of areas such as taxation, legality, stability etc. that are adding to confusion and skepticism,” Mehta said. “It was the same situation with stock markets. When they first started, it was considered similar to gambling. But as the markets grew and the business developed, it gained acceptance.”
The involvement of the Securities and Exchange Commission in stock market regulation to safeguard investments was a big step in that acceptance — and one we are seeing the beginning stages of now with crypto, Mehta added. He stressed the importance of doing research before investing, and to always consult a professional.
While he didn’t explicitly state he was pro-crypto, Jimmy Baker, president and head of capital markets for B. Riley Securities, had a lot of positive things to say about it. He said his firm has become “one of the largest underwriters for crypto-related businesses, raising hundreds of millions of dollars for such companies since 2021.”
Though, he said his clients are most interested in investing in companies that benefit from the crypto ecosystem, rather than directly in cryptocurrency itself.
The BIG NUMBER
— The value as of June 28 of Tysons-based MicroStrategy’s 129,699 bitcoins, which it had purchased at an average price of $30,664 per bitcoin over several years. If anyone can be called a true believer in that cryptocurrency, it is MicroStrategy CEO Michael Saylor, who has not wavered from his pro-bitcoin position despite the recent collapse of its value. By July 20, each bitcoin was worth just over $23,000.
Robert Cohen, a partner with Citrin Cooperman and member of its digital asset committee, said he is still neutral on cryptocurrency. He urged potential investors to use research that doesn’t rely on marketing materials — his job is to educate clients and help them to make their own informed decisions. So even a dedicated investment expert in crypto isn’t necessarily going to try to talk you into it.
“Be vigilant in terms of the various platforms available to invest in digital assets. Assume all platforms are designed to defraud you and go about determining each platform’s controls to prevent nefarious actors from stealing your money,” he advised.
He also said not to let “FOLO” (fear of losing out) dominate your decision-making, and as always, stay diversified in your investments.
A ‘speculative play’
Abugideiri is happy to discuss crypto with clients, but explains that his firm views it more as a “speculative play” than an investment. If you can afford to possibly lose all you spend on it, he’s willing to help plan how to incorporate it into your portfolio.
Doug Tees, COO and wealth adviser for Jason Howell Co., said he leans pro-crypto, “but with some very large caveats.” Tees is in the process of earning a certificate in blockchain and digital assets from the Digital Assets Council of Financial Professionals as part of his ongoing training.
“I am excited about the possibilities, but cautious about investing,” he explained, what with the current dearth of regulation or oversight. “There is often no one to call if you have an issue with your cryptocurrency — you are on your own.”
For now, he recommends a focus on security and to expect volatility. It’s extra-important to track purchase prices and other details, as the IRS currently treats these assets as property.
“Only invest in products where you can see value — not just popularity,” he said.
And remember that if something seems too good to be true, it probably is.
Not worth it
Scott Puritz, managing director of Bethesda’s Rebalance, offered a distinctly anticrypto take.
“To be candid, Rebalance’s seasoned, world-class investment committee and our entire firm in general does not believe that an investment in cryptocurrency belongs in the same investment pool as an endowment or pension fund, or frankly, in any long-term investment such as a retirement plan,” he said.
He compared its store of value to gold and similar commodities — something else his firm does not advise investing in — and said it does not generate returns organically like traditional stocks or bonds.
“Given the level of fraud in criminality we have seen on some of the startup crypto exchanges, cryptocurrency has become all pain and no gain,” Puritz said.
Know what you don’t know
Several of the experts stressed that crypto is still in its early stages, so everyone is still figuring it out — and it’s normal to be extra cautious in that situation. All the firms represented are at minimum studying how it works and performs, and one, Citrin Cooperman, actually has an entire committee dedicated to educating their professionals on digital assets, along with associates who are experts in how to correctly report crypto sales for tax purposes.