Bit­coin’s Mil­len­nial Ap­peal

Ad­vi­sors should un­der­stand how the cryp­tocur­rency at­tracts a gen­er­a­tion that be­lieves in the power of net­works.

Financial Planning - - CONTENT - By James Thorne

The cryp­tocur­rency at­tracts a gen­er­a­tion that be­lieves in the power of net­works.

IT WASN’T BE­CAUSE I THOUGHT IT WAS GOLD. AND I doubted it could kill the dol­lar. So why did I buy bit­coin? The an­swer has more to do with the com­mu­nity than the cur­rency, and may con­tain lessons for ad­vi­sors work­ing with mil­len­nial clients.

My in­tro­duc­tion to bit­coin was a bit un­usual. When I was read­ing “Dig­i­tal Gold,” a book about bit­coin’s ori­gins by Nathaniel Pop­per, I came upon the name of some­one who had at­tended my high school: Erik Voorhees.

The founder of dig­i­tal cur­rency ex­change Shapeshift, Voorhees was also one of the early ad­vo­cates of bit­coin. I called him to see what I could learn.

Voorhees talked about the role of trust in fiat cur­ren­cies, and how the pur­pose of blockchain was to re­place trust net­works. Much of this went over my head. But his en­thu­si­asm stuck with me. I watched news re­ports about how the com­mu­nity nav­i­gated crises and weath­ered hacks. Each time the com­mu­nity found a path for­ward, the cur­rency’s value rose.

If you ad­vise mil­len­nial clients, it’s worth keep­ing in mind that we came of age in an era of ideas that live or die on net­works. Com­pa­nies such as Face­book and Netflix have adopted user growth, rather than just profit, as a key met­ric of suc­cess. From that van­tage point, bit­coin’s vi­brant and grow­ing com­mu­nity is hugely valu­able.

I bought a small amount of bit­coin over the sum­mer with the thought that, if enough tal­ented and ded­i­cated peo­ple want an idea to be­come a re­al­ity, it’s prob­a­bly in­evitable that it will.

I wasn’t alone. Lead­ing cryp­tocur­rency ex­change Coin­base now has over 10 mil­lion users. I’m also right in the crypto sweet spot, as 43% of mil­len­nial men would pre­fer to own $1,000 worth of bit­coin than govern­ment bonds, ac­cord­ing to a 2017 sur­vey by Har­ris Poll for Blockchain Cap­i­tal.

I didn’t jump for joy when my in­vest­ment dou­bled — then tripled. Like oth­ers, I found the price shocks fright­en­ing. What fi­nan­cial ed­u­ca­tion I had cen­tered on mod­ern port­fo­lio the­ory, and noth­ing about bit­coin seemed to fit into that model.

Still, I couldn’t ig­nore the op­ti­mism the crypto world had for this coin. As a 20-some­thing who can only view my re­tire­ment through a te­le­scope, I can af­ford to be pa­tient. For now, I’ve re­solved to leave my bit­coin stake alone for a decade. I don’t see my small stake in cryp­tocur­ren­cies as an in­vest­ment. Maybe it’s a gam­ble. But I pre­fer to think of it as some­thing else: a few coins thrown into a foun­tain that might some­day bring good luck.

Ad­vi­sors may balk at clients who want to own bit­coin. Rather than fight them right away, ad­vi­sors should lis­ten to their clients’ rea­sons for want­ing to own it. Do they want to ride the wave, or are they con­vinced it has a real fu­ture? Their an­swer could pro­vide in­sight into their mind­set. After en­gag­ing in this dis­cus­sion, you might even de­cide that, if they in­vest in a small crypto stake, it may scratch their itch with­out en­dan­ger­ing their port­fo­lio.

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