Is bitcoin ‘the next kale’?
CHICAGO — There were mutual funds and software for advisors, even silk ties, pocket squares and colorful socks for sale at Schwab Impact, but no bitcoins.
This was truly a missed opportunity, since it’s the one investment that had nearly every advisor and executive talking at the convention this week. The buzz among wealth managers greatly resembled the blend of curiosity and apprehension about cryptocurrencies evident in banking in recent years, and it highlighted how the conversation is widening.
Publicly, bitcoin — which has reached a historic high of over $7,900 per token — was held out as an example of unbridled fintech disruption.
Charles Schwab CEO Walt Bettinger told the conference that bitcoin would soon require government regulation, lest it would grow into a threat to governments worldwide, challenging local currencies.
Even “Liar’s Poker” author Michael Lewis, who has made a career narrating Wall Street’s excesses, told the audience that he “didn’t see the story” behind the sudden rise of cryptocurrency.
“There was something unreal about it,” he said, describing the first time he met bitcoin enthusiasts. “The insecurity of bitcoin as a store of value is a big problem. The volatility of bitcoin means it’s very hard to use as a means of exchange.”
Lewis told the audience he perceived bitcoin as a “pump-and-dump” scheme by its owners.
Despite such public admonition, more than one advisor or executive in attendance privately copped to owning a bitcoin, or envying a colleague who had bought into the cryptocurrency before its recent meteoric rise.
“My friend kept putting his bonuses into bitcoin,” one executive said. “It’s worth over $1 million now. I was just talking to him the other day. He couldn’t believe it — seven figures now!”
The executive asked his friend if he was going to cash out. “He said, nah, he wanted to see where it would go.”
Another conferee casually noted that he purchased one bitcoin years ago, and he has held onto it, curious to see what becomes of the cryptocurrency movement.
“I’m not against it,” he said.
'THE NEXT KALE'?
Liz Ann Sonders, Schwab’s chief investment strategist, sighed at the mention of cryptocurrency and acknowledged calls from curious clients about cryptocurrency investing.
“Most of mine are, What do you think of bitcoin?” she said.
Sonders noted that Schwab, like many custodians, is developing blockchain technology to explore its potential to transform how the industry records transactions and custodies assets.
But bitcoin is still even difficult to purchase, she noted. “Some of it smacks of speculative excess.”
The offering provides a new way of investing in cryptocurrency.May 8
Sonders scoffed at the idea that millennial investors trusted bitcoin more than a bank.
“Ask them what a bitcoin is, ask them what a cryptocurrency is — I bet you none of them would know,” she said. “I ask people why they’re interested, and they tell me, ‘I don’t know, it seems like the next big wave.’ It’s the next kale.”
Advisors fielding client calls need to take a wider perspective, said Jeffrey Kleintop, Schwab’s chief global investment strategist.
“It’s a $150 billion marketplace if you add up the 100 top cryptocurrencies,” Kleintop said. “We’ve got another alternative currency called gold. It’s been around awhile. It’s a $7 trillion market. How big is that in people’s portfolios?”
There is good reason to be interested, Kleintop added, but there is still much to develop around the cryptocurrency market, he said, including additional regulatory levers and even popular choice.
“There are so many competing cryptocurrencies and it’s like any technology investment,” he said. “Which one is going to win?”