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Oct 7, 2018

Ric Edelman: Bitcoin will be an asset class

Posted by in categories: bitcoin, cryptocurrencies, economics, finance, government, innovation

Kudos to WallStreet analyst and advisor, Ric Edelman. He drank the Kool-Aid, he understands a profound sea change, and he sees the ducks starting to line up.

Check out the clearly articulated interview, below, with Bob Pisani at the New York Stock Exchange and legendary Wall Street advisor, Ric Edelman, (Not my term…That’s what CNBC anchor, Melissa Lee, calls him). Read between the lines, especially the last words in the video, below.

Ric Edleman has just joined Bitwise as both investor and advisor. This lends credibility and gravitas to the organization that created the world’s first cryptocurrency index fund. Bitwise benefits from Edelman’s affiliation, because the US has been slow (some would say “cautious”) in recognizing the facts on the ground: Cryptocurrency is already an asset class.

Edelman fully embraces a strong future for Bitcoin—not just as a currency or payment instrument, but as a legal and recognized asset class; one that is at the starting line of a wide open racetrack. He explains that the SEC sets a high bar for offering a Bitcoin ETF, but that this will be achieved. It will pave the way for large institutions, pension funds, etc to allocate a portion of money under management for blockchain products.

At timestamp 3:39, Melissa asks Edelman “Why wait for an ETF?” and “If you believe this strongly, why not advise clients to invest a portion of assets into Bitcoin right now?

Edelman’s response is stunning. He explains that he is frustrated, because this is what he wants to advise. But, his firm is bound by the Investment Act of 1940—and so, they cannot tell a client “Go to Coinbase” or “Invest in a private fund such as Bitwise—that I am such a big fan of. We don’t have that ability in our practice.” [i.e. until the SEC recognizes Bitcoin as an asset].

In my opinion (and in the opinion of Edleman), SEC recognition of Bitcoin as an asset can’t be far off…

  • It’s already happening in other countries. Reputable exchanges and index funds exist today.
  • Unlike a traveler’s check or Amazon gift card, it is inherently a store of value, whether or not you believe that its value is intrinsic;
  • The IRS already considers it an asset for tax purposes (What an odd schism in definition & treatment!)
  • It is legal to pay staff in Bitcoin and use it to settle debts, for any recipient that accepts it. For employees and consultants, it is a wage or stipend, just like FIAT. They can convert into cash immediately—or retain crypto it to pay their own bills)

It’s not difficult to read between the lines. Edleman makes a clear recommendation, although he can not yet advise this—certainly not on the record. His personal forecast for long term adoption and appreciation, especially of Bitcoin, matches my own analysis. His new affiliation with Bitwise (a pretty bold move) demonstrates certain commitment.

This ends my analysis of Edelman’s strong endorsement. But it raises another important question:

If large financial institutions are likely to offer Bitcoin products
and services—and if credible analysts & advisors are chomping
at the bit to recommend this new asset class—shouldn’t we
invest in Bitcoin now?!

Ironically, I do not recommend hording or investing in cryptocurrency, even as a collectable. Why?! Because of the big “Investment Catch-22”. I don’t discourage investing in Bitcoin because I fear that its value will lessen. It is for a completely different reason. And so, my advice against investing is half-hearted.

Currently, Bitcoin and altcoins are widely misunderstood. Many people have these false impressions…

  • It is not backed by anything
  • It interferes with tax collection
  • Cryptocurrency facilitates crime
  • Governments will never allow it
  • They do not convey compelling benefits over government-issued currency
  • They water down the overall money supply
  • Their deflationary nature threatens economic growth
  • They are easier to lose and subject to scams & hacking
  • They do not facilitate refunds, rescission, recourse and customer claims
  • They interfere with a government’s ability to control its monetary supply

All of this is untrue, except the last item—and that one is a tremendous benefit.

Additionally, blockchain currencies fluctuate widely in real market purchasing power, many altcoins and all ICOs are scams, and acceptance is far from being ubiquitous. Clearly, widespread adoption requires stability, infrastructure, trust and ubiquity.

This cannot happen until two things occur:

  1. The fraction of transactions in normal business and retail commerce (purchases, salaries, debt payment and settlement) must significantly dwarf the fraction that is driven by investors, hoarders and speculators.
  2. A significant number of established brands, services or retailers must begin publishing prices in Bitcoin and honoring those prices throughout a defined sale period (e.g. until the next catalog is published or until the next production run).

Things are beginning to change, but for such a positive and transormative mechanism, that change is frustratingly gradual.

A series of falling dominos is already in process. But, the end game is retarded by those of us who invest in Bitcoin, because we are removing a limited resource from circulation and contributing to volatility. We do this, because we realize that—in the long run—Bitcoin can only go up in value. Yet, our investment at such an early stage (before consumer adoption) makes the infant sick.


Philip Raymond co-chairs CRYPSA, hosts the New York Bitcoin Event and is keynote speaker at Cryptocurrency Conferences. He advises The Disruption Experience in Singapore, sits on the New Money Systems board of Lifeboat Foundation and is a top Bitcoin writer at Quora. Book a presentation or consulting engagement.

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