Trends with Benefits
Trends with Benefits #52: [Crypto Series 3] - How to Trade Bitcoin with Ari PaulEd Lopez, Head of ETF ProductApril 20, 2021
I continue our special bitcoin podcast series by welcoming Ari Paul, CIO of BlockTower Capital to the show to discuss how bitcoin is traded and the market outlook for the cryptocurrency amidst its growing acceptance and long awaited legitimization by the government, financial services industry and most importantly, investors.
Store of Value vs. Technology — What Will it Be?
Ari and I begin our discussion by taking a walk down memory lane, if you will, by looking back at the crypto space over the last decade or so. Ari began his career in the traditional finance space and describes his introduction to bitcoin and the moment in 2016, when he realized its magnitude, categorizing it as the best asymmetric trade of his lifetime. Today, Ari explains why he still believes in the power of bitcoin and how he thinks about the upside today, versus back in 2016. He also highlights two potential scenarios he sees the cryptocurrency moving towards: store of value versus technology and what both scenarios could mean for the future.
We discuss the mechanics of trading bitcoin by first discussing the technology behind cryptocurrency, i.e., cryptography, and the vital role trust must play between the investor and the given cryptography technology. As normalization of bitcoin continues to increase, the mechanics for trading bitcoin still has a little ways to go. While investors are not able to log into their brokerage account and purchase bitcoin the same way they would a traditional asset, Ari believes we will eventually see this over the next decade. Ari highlights the important role counter party aggressiveness plays in the difference between a stock exchange versus a crypto currency exchange, as well as what investors should look for when evaluating crypto trading platforms and how this should differ between individual investors and institutional investors.
Trend or Fad
Listen for Ari’s take on thematic investing, value stocks and connected home fitness.
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Cryptocurrency is a digital representation of value that functions as a medium of exchange, a unit of account, or a store of value, but it does not have legal tender status. Cryptocurrencies are sometimes exchanged for U.S. dollars or other currencies around the world, but they are not generally backed or supported by any government or central bank. Their value is completely derived by market forces of supply and demand, and they are more volatile than traditional currencies. The value of cryptocurrency may be derived from the continued willingness of market participants to exchange fiat currency for cryptocurrency, which may result in the potential for permanent and total loss of value of a particular cryptocurrency should the market for that cryptocurrency disappear. Cryptocurrencies are not covered by either FDIC or SIPC insurance. Legislative and regulatory changes or actions at the state, federal, or international level may adversely affect the use, transfer, exchange, and value of cryptocurrency.
Investing in cryptocurrencies comes with a number of risks, including volatile market price swings or flash crashes, market manipulation, and cybersecurity risks. In addition, cryptocurrency markets and exchanges are not regulated with the same controls or customer protections available in equity, option, futures, or foreign exchange investing. There is no assurance that a person who accepts a cryptocurrency as payment today will continue to do so in the future.
Investors should conduct extensive research into the legitimacy of each individual cryptocurrency, including its platform, before investing. The features, functions, characteristics, operation, use and other properties of the specific cryptocurrency may be complex, technical, or difficult to understand or evaluate. The cryptocurrency may be vulnerable to attacks on the security, integrity or operation, including attacks using computing power sufficient to overwhelm the normal operation of the cryptocurrency’s blockchain or other underlying technology. Some cryptocurrency transactions will be deemed to be made when recorded on a public ledger, which is not necessarily the date or time that a transaction may have been initiated.
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- An investment in cryptocurrency is not suitable or desirable for all investors.
- Cryptocurrency has limited operating history or performance.
- Fees and expenses associated with a cryptocurrency investment may be substantial.
There may be risks posed by the lack of regulation for cryptocurrencies and any future regulatory developments could affect the viability and expansion of the use of cryptocurrencies. Investors should conduct extensive research before investing in cryptocurrencies.
Information provided by Van Eck is not intended to be, nor should it be construed as financial, tax or legal advice. It is not a recommendation to buy or sell an interest in cryptocurrencies.
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