The ETF Think Tank turns its focus back to the cryptocurrency markets as ex-DJ turned crypto enthusiast Scott Melker joins the panel for a discussion. After beginning to study the crypto market back around the end of 2016, he has become a staunch advocate for Bitcoin and (some) other coins and talks about both the potential of this market and some of the possible pitfalls.
The discussion started by Melker being asked if he saw any similarities between being a musician and a chartist. He notes that the two are actually similar because they both involve following a creative process and you ultimately have to follow where that process takes you. You may have an idea where you want the story to go, but it’s about following that process to arrive at your endpoint.
Melker said one of his first experiences with cryptocurrencies came in 2012 when he was offered Bitcoin as payment for a DJ gig instead of cash (he turned it down). That was his first exposure and viewed it as an opportunity to discover and learn more about it. He began trading and “went down the fiat and monetary policy rabbit hole”, but soon began to understand Bitcoin better and viewed it as a solution. Today, he likes to say “The dollar is for spending. Bitcoin is for saving.”
One of the themes that came up frequently in the discussion is the notion of cryptocurrencies and the free market. Melker says that a few narratives keep getting repeated whenever crypto prices go down, such as ransomware, environmental issues, and manipulation. He emphasizes the notion that the idea of Bitcoin being manipulated is absurd because it is one of the last truly free markets out there. If something moves against you, it does not mean there’s manipulation. Of course, Elon Musk’s name comes up and Melker says that he does not see a great deal of difference between what Musk is doing to Bitcoin or dogecoin prices and what Jerome Powell and the Fed do to Treasuries and stocks.
Mellker says that because he is a long-term crypto bull, he views the price movements in Bitcoin and other cryptos differently than many. If you view bitcoin as a long-term solution or you are using it as a hedge, you shouldn’t be worried about short-term price movements because it’s the long-term narrative that matters. Contrast that with traders and speculators who are more concerned with price movements. For him, he says price is just a meme and bitcoin is a perfect example that price and value are two very separate things.
That does not mean there isn’t a place for traders, but you have to be willing to accept what it is you’re looking to accomplish. Most people, he believes, are better off sticking with coins that have a utility or a use case, which is relatively few. He notes that if you are buying dogecoin thinking it’s going to change the world, you’re probably going to get ripped. Most coins are no more than speculative trading assets. If you acknowledge that you’re just gambling or looking to have fun, he says that these folks should have at it since that’s one of the benefits of a free market, but most of these coins will eventually die. Investing in blockchain as opposed to Bitcoin directly could be an alternative.
A conversation about cryptocurrency wouldn’t be complete without bringing up a potential Bitcoin ETF. He’s quick to point out that a bitcoin ETF would be a massive contradiction because it’s a government agency approving a means of accessing it. While many market watchers believe that we will still get a bitcoin ETF later this year, Melker sees early 2022 as the first real shot at approval.
Ultimately, he says, Bitcoin does not need a 3rd party to verify it because it’s already here to stay. Not long ago, there was reputational risk to bringing up bitcoin in a corporate meeting room. Today, there’s reputational risk if you don’t bring it up. Whether one believes that all portfolios should have at least a modest allocation to crypto or if you believe that crypto is going to change the world, there’s pressure to have that discussion and an ETF would help alleviate some of that pressure.
This week our guest will be Paul Baiocchi, joining us to discuss MLPs, infrastructure and yield. Sign up here.
Disclosure
The information provided here is for financial professionals only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.
All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed.
Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve.
All investments involve risk, including possible loss of principal.
The value of investments and the income from them can go down as well as up and investors may not get back the amounts originally invested, and can be affected by changes in interest rates, in exchange rates, general market conditions, political, social and economic developments and other variable factors. Investment involves risks including but not limited to, possible delays in payments and loss of income or capital. Neither Toroso nor any of its affiliates guarantees any rate of return or the return of capital invested. This commentary material is available for informational purposes only and nothing herein constitutes an offer to sell or a solicitation of an offer to buy any security and nothing herein should be construed as such. All investment strategies and investments involve risk of loss, including the possible loss of all amounts invested, and nothing herein should be construed as a guarantee of any specific outcome or profit. While we have gathered the information presented herein from sources that we believe to be reliable, we cannot guarantee the accuracy or completeness of the information presented and the information presented should not be relied upon as such. Any opinions expressed herein are our opinions and are current only as of the date of distribution, and are subject to change without notice. We disclaim any obligation to provide revised opinions in the event of changed circumstances.
The information in this material is confidential and proprietary and may not be used other than by the intended user. Neither Toroso or its affiliates or any of their officers or employees of Toroso accepts any liability whatsoever for any loss arising from any use of this material or its contents. This material may not be reproduced, distributed or published without prior written permission from Toroso. Distribution of this material may be restricted in certain jurisdictions. Any persons coming into possession of this material should seek advice for details of and observe such restrictions (if any).
