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Bitcoin, Ethereum Have Long-Term Value: Crypto Platform Exec

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What You Need to Know

  • Although the crypto market lost hundreds of billions of dollars in value in May, Bergquist expects long-term growth for Bitcoin and Ethereum.
  • Crypto expert Ric Edelman warns that financial advisors risk losing credibility if they can’t discuss digital currency with their clients.
  • Advisors who want to help clients who are interested in cryptocurrencies should keep it simple, Bergquist says.

The case for cryptocurrency and blockchain remains strong despite recent market upheaval, with major, time-tested players presenting appealing opportunities for long-term value, according to Neil Bergquist, co-founder and CEO of the digital currency cash exchange Coinme.

The cryptocurrency market lost hundreds of billions of dollars in value in May as the broader financial markets slid on economic concerns and as the algorithmic stablecoin TerraUSD lost its peg to the dollar and the companion coin, Luna, collapsed.

Nonetheless, Bergquist expects long-term growth for key digital currencies and technologies, notably industry leaders such as Bitcoin and Ethereum.

“I do think that fundamentals of cryptocurrency and blockchain are still valuable and I think people will move their asset reserves to more of the longer-term cryptocurrencies that have larger market caps and have more resiliency, and that have not shown to have any kind of technical issue like what we’re seeing in the stablecoins,” he said in an interview in May, days after Bitcoin hit a 52-week low.

“Personally I’m not selling any cryptocurrency, I’m just holding, and I know that this time will pass and the top cryptocurrencies will continue to grow in value long term,” said Bergquist, who favors cryptocurrencies with large market caps that have stood the test of time, have large communities and offer unique real-world use cases or technological value enhancements to the industry. There are many different strategies available to individual investors, he noted.

Value in Proven Players

Potential buyers need to take care, though, because the nearly 20,000 cryptocurrencies now in existence likely won’t all survive in the longer term, he predicted.

“From a technical perspective it’s extremely easy to create a cryptocurrency these days, which is one reason why purchasers need to be cautious, because there could be a coin that was created and then it was beautiful lipstick on the pig, and then that coin really doesn’t do anything unique or novel and actually it might even have suspect actors behind it,” Bergquist said. “So it’s really important to do the due diligence on coins when you start looking at alt coins and coins with small market caps or coins that are relatively new.” 

Coinme, which started in 2014 by introducing Bitcoin ATMs, now operates the largest such network in the U.S., with more than 21,000 cash exchange locations, and enables consumers to buy seven cryptocurrencies through its app: Bitcoin, Ethereum, Polygon, Stellar Lumens, Dogecoin, Litecoin and Chainlink. The venture capital-backed company, based in Seattle, considers digital currency an economic empowerment tool.

While experts and enthusiasts see a financial services revolution in cryptocurrency and the blockchain technology underlying it, many consumers remain confused and wary. Even before the recent market dive, critics cited the risks surrounding digital currencies, including their volatility, a lack of standardized procedures for holding them and an uncertain regulatory structure.

Then there’s simply the lack of understanding. Crypto Literacy, an industry group, says on its website that 98% of people taking its online crypto literacy quiz failed.

As consumer interest grows, however, and cryptocurrency starts to take hold in the corporate world — Fidelity recently announced it would add Bitcoin as a choice in 401(k) accounts — financial advisors who may not have paid attention to the industry have come under pressure to get up to speed. 

Cryptocurrency expert Ric Edelman, founder of the Digital Assets Council of Financial Professionals, recently warned that financial advisors risk losing credibility if they can’t discuss digital currency with their clients. Cryptocurrency is expected to produce $5 billion in advisory fees over the next five years, he said at a wealth management conference.

To Know It, Buy It

Coinme’s Bergquist offered tips on ways financial advisors can help clients who are interested in Bitcoin or other digital currencies, and suggested that advisors keep it simple.

“For people that are just starting to want to allocate money to cryptocurrencies, it’s important that they understand the ABCs of what is blockchain, what is a digital currency and specifically what are the top cryptocurrencies in the market — Bitcoin, Ethereum — and really help them understand why they’re valuable. And then also help them understand why they’re valuable by buying them and being able to transact with them either as a store of value or as a medium of exchange,” Bergquist said.

Rather than trying to learn everything about cryptocurrency and blockchain all at once, those interested in understanding it should start by focusing on Bitcoin, then learn about Ethereum “and then go from there,” Bergquist said.

“We always say the best way to learn about Bitcoin is to buy it, and being able to use it as digital money the way many of our customers and people in the industry use it,” he said. More than 80% of the world population now owns smartphones, “and thanks to blockchain technology those phones can now receive, store and send money in a decentralized, distributed manner. And that is a massive technological breakthrough,” he added.

Learn the Basics

“As financial advisors and clients of financial advisors start to learn more about what, really, Bitcoin is and what cryptocurrencies do to solve real-world problems, then they’ll start to understand the value in them and then start to look beyond the headlines and know fundamentally this is going to change the world,” Bergquist said. “And that creates a long-term perspective, which is really important, especially in times like these.” 

The famous Bitcoin white paper that introduced the concept details exactly what the peer-to-peer electronic cash system does, Bergquist said. The paper explained that parties would make direct cash payments through a peer-to-peer network without a financial institution serving as intermediary.

Bitcoin, a software-based unit of account, sits on the Bitcoin blockchain, an online distributed ledger powered by a network of computers, called miners, that process transactions on the ledger.

“There’s not one company that owns all those computers, so that’s the distributed, decentralized nature of Bitcoin,” Bergquist said. “It’s all a community network that processes it. And there’ll never be more than 21 million Bitcoin created; right now we’re just over 19 million, and what that does is create trust. Because if you own Bitcoin, then you own a percentage of that supply, which makes it scarce. And that’s why people are very bullish on the price of Bitcoin long term.”

Bitcoin Price Volatility

Bitcoin, which reached an all-time high of more than $68,900 in November, tumbled to a 52-week low around $25,900 on May 12, then regained some ground, recently trading around $30,000 — roughly the same value the cryptocurrency reached during a correction last summer, Bergquist noted.

“Bitcoin has a tremendous way of holding its floor despite these high price swings,” he said.

Bitcoin toppled to about $3,000 in a 2018 correction, “so the floor is higher than its previous floor of a few years ago and that should give people a lot of confidence that the floor for Bitcoin has not fallen out, and the floor for many of the other cryptos is higher than the previous floor in other market corrections,” he added. “Ethereum hasn’t hit its previous floor, which is pretty amazing.”

While Bitcoin and Ethereum generally have held their floors on a year-over-year basis, that could change, he said.

When Coinme introduced one of the first Bitcoin ATMs, the currency’s price stood at roughly $420, then slipped to $250, Bergquist recalled. “And then it took off on a bull run in late 2016 into 2017 — $20,000, oh my goodness — and then it had a selloff and went down to about $3,000 and everyone, all the naysayers came in and said, ‘I told you so,’ and then it took off again and went up to over $60,000,” he said. “These rising floors are an example of that long-term value proposition of why it can be seen as a trusted store of value.”

While crypto has proved its tremendous upside potential, buyers do need to consider any asset’s downside risks, he noted. 

Various analysts have predicted Bitcoin could eventually reach $500,000 or $1 million, and some people expect it will become the world’s reserve currency, according to Bergquist. (Sentiment toward crypto cooled considerably after the recent market drop, though, with Bloomberg reporting in late May that Guggenheim Partners Chief Investment Officer Scott Minerd, who had projected a $400,000 price for Bitcoin, now expected it to slide to $8,000.)

“Personally I see Bitcoin over $100,000, it’s really just a question of when; Ethereum over $5,000, conservatively. That’s where I spend most of my mental energy,” Bergquist said.

Major corporations have started to put Bitcoin on their balance sheets because it’s a better store of value than cash, Bergquist noted, citing MicroStrategy, Tesla and Galaxy Digital. “Right now cash is subject to inflation as we all know. And Bitcoin has a fixed supply. … There’s no Bitcoins Fed that will decide to print more Bitcoins,” he said. “If the biggest banks in the world are buying Bitcoin I think that says something.”

Edeman notes in his new cryptocurrency guide, “The Truth About Crypto,” that several large financial institutions offer Bitcoin to customers and that MassMutual is among the companies that have purchased the cryptocurrency.)

Deciding What to Buy

Areas creating uncertainty now include stablecoins, altcoins and DeFi, or decentralized finance, a developing decentralized financial technology, Bergquist said. He suggested people do more research on stablecoins before they buy to make sure they’re backed by cash.

“With that said, Bitcoin is a safe bet relative to the world of cryptocurrencies,” he said. “I would say that Ethereum is also a safe bet given its longevity and the strength of its community.”

Communities are important in deciding which cryptocurrencies to buy, Bergquist said.  “Communities are the reflection of the value of a coin, and those communities can be developers, fund managers or partners that use the coin in some way,” Bergquist said. “Bitcoin has the strongest community; Ethereum has the second strongest community.”

Financial advisors and investors seeking to learn more about cryptocurrency can tap into resources such as CoinDesk and CoinMarketCap to explore coins, price and market caps, and turn to experts online, he suggested. Among those Bergquist cited are MicroStrategy CEO Michael Saylor, economist and professor Tyler Cowen and investor and YouTube podcaster Anthony Pompliano.

Bergquist, who described himself as more of a fundamentals-driven purchaser, said it’s important to understand assets’ inherent value and make purchase or investment decisions based on that.

“Everyone needs to take a balanced approach to how they manage their money and not put  their eggs all in one basket,” Bergquist said. “Be greedy when people are fearful and have a long-term perspective.

”Long term, the fundamental benefits of Bitcoin and Ethereum and other top cryptocurrencies will win.”