The ETF Think Tank continues its theme of speaking with some of the leading minds in the cryptocurrency space by welcoming Steve Ehrlich, CEO & co-founder of Voyager Digital, the platform that provides cryptocurrency brokerage services to traders and offers access to more than 50 different coins. He joins to discuss altcoins vs. bitcoin and the need for more crypto education, among other topics.
We start the discussion that has come up in previous conversations - how much of an individual’s portfolio, if any, should be dedicated to cryptocurrencies? Ehrlich says that at least some allocation should be made, but the degree depends on how educated you are in the space. About 1-5%, he says, is around the right number, but those more familiar with these coins could conceivably go higher than 5%. Less crypto-familiar folks who go above 5% are doing more gambling than investing. He notes that bitcoin is unlikely to disappear since there’s so much support and interest for it.
How then should people go about educating themselves on cryptocurrencies and trade in a space where everyone believes they are an expert? Voyager is working to increase education and literacy in the space, but it is more than just talking about what a coin is. The focus, instead, should be about all the ways cryptocurrencies are going to make our life better. Ethereum, for example, can be used to facilitate contracts, such as mortgages, titles, etc. Ehrlich says there should be no way that a mortgage application is tied up for 45 days waiting for funding to come through. Cryptocurrency could shorten that time considerably and it should be happening immediately. If the coin doesn’t have a clear business case or application, traders should be cautious.
The question was asked about what Ehrlich’s Voyager platform does differently that’s of benefit to crypto traders? In the past, it has been referred to as the Robinhood for crypto, but the overall focus has been on liquidity and order flow. Voyager attempts to aggregate liquidity on a global basis and, thus far, has been able to get liquidity for clients without much problem. The platform has also set out to connect with multiple crypto exchanges, which allows for greater liquidity overall and the ability to better get customers the best prices available. The overall goal is to make it easier for crypto traders to trade coins and liquidate positions on an easy-to-use app.
Another popular topic in the cryptocurrency space is taxes and if the SEC will ever get itself in position to regulate the industry. Ehrlich feels that by next tax season there are going to be some sort of requirements on it. He believes it could follow the options market path where tax forms were first delivered for proceeds on trades before it progresses to the point where gains and losses on trades get reported. Required 1099 forms, he says, could come as early as next year.
Ehrlich is optimistic about where the cryptocurrency space overall is heading. He does feel that it needs to perhaps better align with what Wall Street thinks. He sees thematic trading within crypto products coming at some point in the future. He also believes companies could create baskets of coins that are rebalanced on a quarterly basis, similar to the way many index ETFs work, that could draw new investors in the space. The focus, again, needs to be on educating these new arrivals to crypto trading and that should be the priority.
This week we have Mark Yusko, Founder, CEO and CIO of Morgan Creek Capital Management. We'll be discussing Bitcoin and cryptocurrency, innovation, edges, and stacking SATS. Come join us! As always, bring your questions.
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