Don’t invest in crypto if you can’t handle ‘30% drawdowns’ #CriptoNews

00:00 Sean Smith

Crypto has been on a wild ride the past six months, jumping in November on President Trump’s election victory. Bitcoin surging past the $100,000 mark in December, but since we’ve seen the cryptocurrency fall as low as the $76,000 level, currently trading around the $83,000 level. Here to dig into this as part of our weekly FA Corner, brought to you by Capital Group. We’ve got Tyrone Ross, principal and founder of 401 Financial. Tyrone, great to have you here. So, I guess if you are a Bitcoin holder, you’re somewhat used to, or should be used to, a significant amount of volatility. But we’ve got a lot of it lately. What is your message to investors who haven’t gotten into crypto yet about the opportunities in the space, despite some of the volatility that we’ve seen?

01:16 Tyrone Ross

Yeah, volatility comes with it. Um, it’s a temperamental teenager, right? 17 years old. But I think for folks that want to invest in it, I think the first thing I would say is look to make sure you have a long-term time frame. If you’re not willing to hold it for at least five years and deal with 30% drawdowns, which are the norm, you should not do it. And I think mainly to make sure you are an investor, there’s a difference between a trader and an investor. And unfortunately, the crypto space is prevaded with traders, um, and not enough investors. And as the asset class matures, I think there’ll be more seasoned investors that can deal with this volatility. Um, but one, make sure you are an investor, and two, make sure you have a long-term time horizon.

02:35 Sean Smith

And how long does that time horizon have to be? Because often when I speak with people who hold Bitcoin, they tell me they are never ever ever selling under any circumstances. They’re just going to transfer their Bitcoin to their kids. Um, at what point should investors consider maybe taking a little bit of profit?

03:05 Tyrone Ross

Well, to those people I say my mother has a phrase, keep living. Everyone’s going to need dollars at some point. So, um, at the, there’s prudent points to which you would want to sell your Bitcoin and you, you won’t interview a bigger crypto hippie, believe me. So I think one, you, you want to, you want to look at this based on goals. How old are you? If I’m 25, sure I want to hold it for the next 25, 30 years. If I’ve bought it in my, you know, my 40s and now I’m 50, maybe I’m looking at selling some off. It all comes back to what your goals are with this and understanding how the market works and how you’re looking to have that as part of a broader financial plan for your life. It’s not as simple as just buying it and letting it sit there. There should be a plan around it like all assets.

04:31 Sean Smith

And when you look at digital currencies, obviously there’s Bitcoin, but what are some other cryptocurrencies that investors should be looking at who are interested in the space?

04:55 Tyrone Ross

I love that question because I think folks need to make the big distinction is the difference between Bitcoin and there’s a difference between crypto, right? And there’s crypto assets is what I call them. They all fall under that umbrella. There are other coins and tokens out there, um, tens of thousands, if we’re being honest. But I think if you’re looking at where there’s a lot of one, market cap, two, liquidity, and three, interest is probably Ethereum and Solana. Um, but I think it all comes back to the mothership first. I think if you at least try to understand Bitcoin, you can understand how Ethereum and Solana and Litecoin and all of those have come after. But I think the main investment that people can make here is really understanding, asking really good questions, reading a ton, looking silly, asking more questions, and then making a small amount, uh, small investment amount and seeing what happens.

06:14 Sean Smith

And talk to me too, just about the regulatory backdrop. There’s obviously a lot of optimism around what Bitcoin regulation is going to look like under the Trump administration. How big of a tailwind could that be, and are there any risks regarding regulation?

06:45 Tyrone Ross

Yeah. So it is a, it is a tailwind. You would think it would be a tailwind. Now, you’re not seeing that in the price. But I think it is, because it’s a builder in the space, and it’s a financial advisor, and someone who speaks often, it’s brought a lot of interest in even our legal and financial said, “Okay, this opens the doors to some of the things that you want to do.” But I break it into two buckets after that. If you are an advisor or in the wealth management space, we would love guidance from the SEC and the CFTC. If you’re listening, joint guidance would be really nice, right? Paul Atkins still needs to be confirmed. That would be helpful. Um, we can see what, finally get some clarity on what our securities and what not. So that’s from the institutional wealth management side. From the retail side, they are talking about redoing some of the defy broker rules, changing some of the tax implications which was starting to go into next year. So I think a retail investor and institutional investor have different things here that they should also be excited about what, um, we’ve been hearing from the government, but I think there’s still a lot of pause because we got to get folks in place. We got to see how this plays out. There’s been a lot of talking, but we need to see these things set in stone, and then folks will allocate and position themselves accordingly. And honestly, I think that’s why you’re seeing the jittery markets right now.

08:47 Sean Smith

All right. Really appreciate you joining us this morning, Tyrone. Thank you.

08:54 Tyrone Ross

Thank you for having me.