Guest: Andy Edstrom, CFA®, CFP®, a financial advisor at WESCAP Group, where he manages more than $300 million for high-net-worth families. Andy is also an advisor and board member of Swan Bitcoin, and the author of a great book called Why Buy Bitcoin.
Insight: At the top of the Bitcoin funnel, there are an almost endless number of entry points that could attract curious investors, consumers, business owners, thinkers, activists, and, yes, financial advisors. But you don’t have to travel down the funnel very far before you hit some legitimate questions about Bitcoin and our broader financial system. Does Bitcoin really have the properties that we’ve historically associated with money and investible assets? Could the U.S government ban Bitcoin? Will the Fed develop a competing cryptocurrency that could hurt Bitcoin’s value? And what does the ongoing “digitization of everything” mean for how we assign value? These are just a few of the questions that Andy and I tackle in this wide-ranging conversation.
3 Quotes from Andy Edstrom:
1. Taking share from gold is the most obvious case for a accrual of value to Bitcoin. You’ve got multiple call options embedded in this investment, but taking share from gold is far and away the clearest. There’s a few characteristics where Bitcoin outscores gold. It’s actually more dense. Yes, you can cram a lot of value into a bar of gold, but with a single code, you can move billions of dollars in Bitcoin. Scarcity is the big one. As Bitcoin, evolves through time the new quantity of units falls by half inexorably every four years. Bitcoin is currently at this inflection point where there’s a little under 2% of supply coming on each year for Bitcoin. And that’s about the same as gold. And with the next having, Bitcoin will be significantly more scarce than gold and that will continue through time.
2. One of the major stumbling blocks for investors and specifically financial advisors is we have this notion in our heads that governments can kill Bitcoin or will want to kill it. And the reality is that was probably true or could have been true maybe five years ago, but we’re just past that point. And actually we’ve been past that point for a couple of years at least, I just don’t think people have realized it yet. There’s no way Bitcoin’s going to get banned or regulated out of existence in America. It’s just not going to happen. Millions of Americans not only already own Bitcoin, but are passionate about it. They see a huge societal benefit to the success of Bitcoin in addition, obviously, to the potential upside in terms of the investment. And they’re not just going to roll over if Congress or some arm of the government decides that it really wants to make life painful for Bitcoin. And what’s interesting about the recent regulation is, yes, there’s been a “crackdown” by the SEC specifically. But most of that really has been directed against digital assets that appear to be securities. And Bitcoin is one of very few digital assets that are unambiguously not securities. Bitcoin looks safer on a relative basis than ever compared to other digital assets out there.
3. We really do believe that Bitcoin is the one investible and crucial-to-own asset class within digital assets. And we really think it’s important that financial advisors get focused on it for the benefit of their clients and their practices. We’re rolling out Swan Advisor Services, which is all about getting your clients access to Bitcoin, making sure that you, as the advisor, can monitor it that way. You can think about your Bitcoin allocation for your clients in the context of their overall portfolios. And then of course also monitor it so that you can charge management fees as appropriate as a financial advisor.
Inventing Bitcoin Andy and I both recommend this book by Swan Bitcoin co-founder and CTO Yan Pritzker, which you can download for free from Swan’s website.