The emerging asset class of cryptocurrency seems to be all the rage—but since it’s so new and so different, it’s being met with plenty of skepticism from investors. Do you have questions about it? Realizing many of his clients wonder about it, WorthPointe advisor John Chapman dedicated a recent podcast to the dynamics of cryptocurrency, speaking with WorthPointe founder Christopher Van Slyke.

The focus of the podcast is threefold:

• Is cryptocurrency a fad or here to stay?
• What makes it so unique/important?
• How can investors make sense of the investment opportunities it presents? 

Learn answers to these questions and find out how cryptocurrency may have a dramatic impact on the way the world operates in the future. Listen here.

Audio Transcription

Speaker 1: (00:02)

Welcome to the John Chapman Show, where we talk about retirement readiness strategies to help you grow and preserve your wealth so that you get the most from life with the money you do have. Are you on track? John is an employee of Worthpointe, LLC. All opinions expressed by John and podcast guests are solely their own opinion and do not necessarily reflect the opinion of Worthpointe. This podcast should not be relied upon for investment decisions and is for informational purposes.

John Chapman: (00:34)

Cryptocurrency is catching all the buzz. So on today’s episode, I chat with Worthpointe CEO Christopher Van Slyke on his perspective of this emerging asset class. And what’s unique about cryptocurrency is its ability to be a medium of exchange like money or gold, but it’s also very secure. And then it’s handled independently of any government entity, which has predominantly handled the creation and distribution of money throughout history. But just as the internet was met with skepticism in the late ‘90s, cryptocurrency has also been met with a fair amount of skepticism. The two main issues I hope to address on this podcast are first, is cryptocurrency here to stay? And second, as an investor, how should I make sense of the investment opportunities so that I don’t miss out? As a disclaimer, today’s conversation is for informational purposes only. And you should really chat with your advisor about your specific situation. But with that, let’s dive into today’s episode on cryptocurrency with Worthpointe CEO Christopher Van Slyke.

John: (01:43)

Thanks for joining me today. I’d like to discuss the topic of cryptocurrency. You can’t go anywhere in the news without seeing stuff on Dutch Coin or Ethereum or Bitcoin. I think for a lot of families that might have approached us initially with some confusion or skepticism, it seems as if it’s something that might be here to stay, whatever form that might take. But what I’d like to be able to discuss with you is, you know, for those people that may be a business owner or executive, and they’re trying to save and invest and take care of their family, how does this apply to them and their situation? What is it? What are some of the things that they need to worry about

Christopher Van Slyke: (02:17)

First, regarding the hysteria you just mentioned about crypto, I noticed that it is the Coinbase crypto exchange is the number one app in the Apple App Store. So that tells me that this is now mainstream, for sure. So it’s a good question. What is it? What does it mean? How should people be thinking about it? In my opinion, it is real. It is a fundamental change in the way that we will exchange for goods and services. It changes the way we relate to government. It will be big. I think it will be as big as the internet. It has already surpassed the yen as the fourth largest currency in the world. Bitcoin, we’re talking about Bitcoin, and we’ll talk about crypto in general as a medium of exchange. So yes, it will be big and it will change the world in a positive way. No doubt about that. So I understand people’s curiosity. I know it as the topic de jour and I look forward to having a little chat about it.

John: (03:23)

Yeah. Maybe can we talk a little bit about just some of the basic mechanics of it, too? When someone says the word crypto, what we’re really talking about is a piece of software or a piece of code. So, how do we make sense of some of these phrases that we don’t really quite know when we’re talking cryptocurrency, but let’s bring it down to something more tangible?

Christopher: (03:42)

Well, crypto is short for cryptography and this came out of the world of cryptography, which is the way to secure things in the digital world so that they’re not stolen and identities stolen. That’s where the term comes, but it is a safe and secure way to exchange information between individuals. And it has come to represent a store of value. I was looking into this topic the other day, and someone mentioned that salt was an important medium of exchange  back in the day. Beads have been mediums of exchange. So back in the day, in the Roman Empire, there was a coin minted by the Caesar, which they used. So the point is money. People will say that crypto cryptocurrency is not money. Well, money is whatever people say it is. And if people are willing to exchange things based on cryptocurrency, well it’s money. It’s money that has evolved outside governmentally. Normally money is printed by governments. This money has been developed in the private sector and is now being used widely by people to buy goods and services, store value. 

John: (05:01)

Yeah. I think something else that people feel confused about Christopher is why there’s so many different coins out there. There’s hundreds. So how do you make sense of all of the coins that are floating out there and what are you paying attention to?

Christopher: (05:14)

Well, you know, kind of like in the early days of the internet, I think 1995, there were a lot of companies promising to exploit the internet for investors and consumers. And the same is true in the cryptocurrency market. Currencies are competing against each other to do a better job of being a store of value or a medium of exchange or other specialized things. So that’s why there are multiple currencies; they’re invented by different people in an attempt to serve niche markets or the general market or what people are using cryptocurrency. So it’s really pretty exciting, much in the way the companies were competing in 1995 for serving people using the internet, cryptocurrencies are competing for your business.

John: (06:03)

So I think acknowledging the fact that it’s not something that’s going to be a fad, it’s not just going to go away, that it will materially change what our future is going to look like—I think that’s an important acknowledgement. So now I’m starting to think about it as an investor. Maybe I’ve heard of so many stories of maybe folks bragging about they got in at the right time and they made a lot of money last year or something like that. So there’s sometimes a sense for folks that maybe haven’t invested in it, that they feel like they’re missing out as an investor. What’s your perspective on investing in this space?

Christopher: (06:36)

Yeah, this is a good time to mention the two separate questions we’re addressing. So is cryptocurrency here to stay? Is it meaningful? Is it going to change the world? Yes, I believe it is. And what’s called the blockchain it’s built on. The other question that we’re getting as a financial advice firm is how do I need to invest different now that this has been invented? And that’s a great question. In my view, investing in cryptocurrency, aside from its use as a store of value in a medium of exchange, is speculative. So, there’s always something, you know, people are talking about cryptocurrency because Bitcoin has gone up to, 50, $60,000 per point. And of course people are interested, but that doesn’t mean that you as an investor should start piling your money into Bitcoin. Realize that if Bitcoin or other cryptocurrencies are useful, then the companies that you probably own in your portfolio will incorporate that technology into their business practices.

Christopher: (07:44)

And I trust the companies, the company managers, to use that technology, to leverage the rate of return I’m expecting as an investor on their own. I personally don’t think that you need a separate allocation to a currency any more than you would buy a yen to add to your portfolio. Now, your portfolio owns currencies, right? The business does use them every day and you’ll begin using crypto in your own life. Now, if you need, if you want to start using cryptocurrency to purchase, then that’s a natural case for owning some crypto. But as part of an investment portfolio, I don’t believe you should allocate a separate tranche of money to what I would call a hot asset class.

John: (08:34)

Yeah. And specifically, too, I’m always fearful of the cases where folks, you know, are bedazzled by stories or haven’t done any due diligence for themselves and want to be able to get in because they see this as an opportunity for just another get rich type of scheme. 

Christopher:

There’s always something. It’s real estate. It’s gold. That comes with so much risk.

John: (08:53)

So, you know, but for a lot of folks, maybe that’s just one aspect of this. So, you know, for others that are thinking, well, this is valuable, this is extremely valuable. I think the world is going to look different in the future. So how do I participate or get an advantage of this? I think to your point, it doesn’t necessarily require you to have to go out there and buy 10 or 15 or 20 different coins in and of themselves to actually get the value from this. Because you know, you’re referencing the tech boom, back in the late ‘90s or the early 2000s. Just by holding normal names, the public companies, you still benefited as an investor because the companies were using the technology.

Christopher: (09:37)

Is there any publicly traded company which didn’t use the internet to do a better job at what it did? 

John: (09:47)

Right? Home Depot was able to have a website, have people buy online, find their prices, go to their stores. And naturally Home Depot would have benefited from the creation of the internet and their website and all those things. And it wasn’t as if you had to buy a piece of code from the internet to get that value to be produced in your portfolio, right?

Christopher: (10:07)

Yeah. You didn’t have to learn HTML and start writing internet code. We all benefit when the standard of living is uplifted by these technologies. And if you’re an investor, useful technologies are taken in by the businesses that you own in your standard portfolio. That’s why I’m saying I don’t think you need a separate allocation to this particular technology, because it’s going to be absorbed into the economy and into the businesses whose job it is to exploit all technology to deliver returns to investors. So that’s why I’m saying you need a separate, you know, should I put 5% of my money in Bitcoin? Well, how much Bitcoin is already in your portfolio and why do you want to put more into Bitcoin? 

John:

Yeah. So that’s kind of like chasing the sexy return and buying a new Ferrari like the guy on Instagram did. 

Christopher:

Yeah, we all do, but I might say that by the time it’s the number one app in the App Store for a crypto exchange, that bus may have left the station.

John: (11:09)

Yeah. It sounds as if Christopher, then, what you’re saying is that of course there is going to be a lot of value from the blockchain itself, but it might take shape in lots of different ways because these coins, so to speak, are competing for each other. So Bitcoin has the big name right now, but I guess that could change in the future. No one really knows. So, you know, if I’m, again, a business owner and executive, I want to save and invest and grow my portfolio so I can take care of my family. You’re feeling as if I’m not missing out on something if I’m not like directly buying into all of these coins right now.

Christopher: (11:43)

You’re already benefiting from the value that cryptocurrency is adding to the economy and you make a good point about who’s going to be the winner in crypto. Anybody remember Yahoo, right? That was the search winner, right? We all knew they had Super Bowl ads and then along came Google, completely displaced them. Who heard of Facebook in 1995? It was Netscape. And then sure enough, they ended up uptaking internet technology and cleaned the clock of those original firms. So I don’t even know which cryptocurrency is going to win, and I don’t know how governments are going to react. And you know, there’s a lot out there. I do know that I have a lot of confidence that the consumers and businesses where we all participate economically will use this technology in ways that we benefit from.

Christopher: (12:41)

And that you don’t have to try to pick who’s the winner. That’s why, when I’m talking about the speculation involved in crypto, it’s trying to pick the winner. And I just don’t think we can any more than we could in 1995 or see Facebook and Google, which didn’t even exist. I don’t know that Bitcoin is going itself, which is a famous cryptocurrency. It’s the first one. I don’t know that it will be the winner. So let’s don’t get in the business of trying to make that bet. Let’s participate in the economy using these cryptocurrencies as we need them as consumers. And let’s trust the businesses that we own in our portfolio to use this technology and incorporate it into their businesses and leverage the profits that they’re going to deliver. 

John:

Yeah. And that seems to be really in line with what your wealth management philosophy is, you know, because at any given time there could be something new that’s sort of hot or sexy, but it seems as if this is in line with the way that you approach wealth management. In general, markets work, so let them 

Christopher: (13:45)

Yeah, markets themselves and market prices and diversification, all those concepts still work. And this to me is no different than real estate or gold or whatever happens to be the flavor of the month in terms of badass. It’s hot and it’s sexy, but the bubble will burst and then we’ll find out who the winner really is, but you won’t have overleveraged yourself trying to bet on it and that’ll be fine. So I think really, at the end of the day, the message is yes, it’s a big deal. Yes. We’re going to benefit, but no, you don’t need to do anything differently in the way you invest. 

John:

Yeah. Well, some wise words, Christopher. It’s always good to hear your perspective. So I appreciate you stopping in to the podcast today and giving us some wisdom. 

Christopher:

It’s great to be here. It’s been a long time. Glad to be back. 

John:

We’ll have you back on soon.

Speaker 1: (14:39)

Thanks for tuning into The John Chapman Show. Be sure to subscribe on iTunes, Stitcher, or Spotify. We encourage your questions, comments, and feedback for additional information. Check The John Chapman Show.com or look for John on LinkedIn and Twitter. See you next week.