Digital Asset Management: The Rise of Bitcoin and Other Digital Assets

“When the perception of risk is lowest, actual risk is highest. When perception of risk is highest actual risk is lowest.” – Greg Foss

There is much to be said in the news and on the internet about Bitcoin, Cryptocurrencies, Dogecoin, and other digital assets. What are they? What do they mean? Are they for you? Listen in as we discuss in a recent podcast the gap that exists between tech geeks and traditional bankers.

Learn more about the possibilities various technologies offer as a savings tool and how to understand the risk and volatility associated with the price of new asset classes.

Much of Life Consists of Choices

Almost all our choices have some component of risk associated with them. The challenge with risk is that its spectrum is wide. It is inherent in almost every area of life. Risk is not uniform, which presents a challenge because what may seem risky to you may have little to no impact on your neighbor.

So, to understand risk requires an understanding of where you fall on the risk spectrum. It takes time to figure this out and usually consists of a few bumps, bruises, and failures along the way. Determining your risk takes time to understand your emotional reactions to change, time to convert complexities to simple task, and time to discover what things matter most to you.

Having a fair understanding of risk and your risk tolerance is one of the best things you can do to navigate not only your investments but the lifestyle you seek to live.

There are Numerous Options and Varying Possibilities of Risk

The ultimate goal is to find a mix of assets that work well together over a long period of time. Some go up while others go down, but, together, they work as a team to grow your wealth over time.

As our global economy has grown, we’ve seen the mix and composition of assets change. During the early 20th century in the industrial revolution, we saw engines and factories come online bringing about a greater need for oil and other fossil fuels from the earth. This drove a greater need for exposure to these assets in the “traditional” portfolio. We saw this again during the 1950’s to 1970’s when globalization was truly coming online. As electronic exchanges were built, assets and asset classes like real estate (REITs)¹, commodities, currencies, and derivatives² were introduced to the modern portfolio. Then, in the 80’s and 90’s came the rise of 401k’s bringing about the adoption of mutual funds and later index funds. All the while introducing more assets and asset classes, each with their own degree of risk. For a more detailed view of risk, read Greg's 40-page paper on credit markets and Bitcoin as a possible hedge³. 

New Technologies Bring New Uncertainties

The early days of each of these new technologies brought uncertainty, misunderstanding, new questions, fears, failures, and concerns. But, each new asset brought opportunities that were realized over time. Each day, as the world spins, men and women continue to prove they can adopt new technologies to provide solutions which start with high risk and volatility, and usually end by reducing both risk and volatility while providing a new asset class that aids in building wealth over time.

As we rolled into the 21st century, we’ve watched our lives become increasingly more digital. We’ve continued to see more and more of our offline worlds move to online, leading to what is commonly referred to as the Digital Revolution. These major transitions, much like the Industrial Revolution, bring about great change but not without uncomfortable disruption. They also bring about change to the pecking order of the primary commodity used within economies. Today, because of the massive digitization of our lives the primary commodity needed in economies is data, not oil.

Lately, you can hardly go a day without reading or hearing about the harmful impacts of fossil fuels, the need to move to electric vehicles (EV), or the rising hysteria around the price of Bitcoin, Ethereum, or other cryptocurrencies. But what does this mean? What are the risks? How do these changes fit within the new digital realm?

Join us and follow along as we’ll be discussing more about the impacts of digitization and the possibility of a rising digital asset class.

SOURCES: [1],[2],[3]

The opinions expressed by Greg Foss are solely his own and do not necessarily reflect the opinion of Archetype or its Advisors. The mention of different asset types or securities products do no constitute a recommendation for our clients. Mr. Foss was or was not compensated for his appearance. If you have any questions about the content of this article or podcast, please contact your Advisor.