Personal Finances

Personal Finances - 2022

Should We be Investing in Crypto at this Time?

By Mo Vidwans


During the month of March this year, President Biden issued an executive order to study digital currencies, a move the industry welcomed, and the skeptics decried as delaying needed regulation. The order titled “Ensuring Responsible Development of Digital Assets” directed agencies across the Federal Government to produce reports on digital currencies and consider new regulations. It even outlined the risks cryptocurrencies pose to the economy, national security, and the climate, while also noting their benefits. It also asked the agencies to do many other things pertaining to the cryptocurrency.

That executive order spells out well the dilemma we all face and I am glad in a way that the Federal government is trying to get to the bottom of this and take a position. Many organizations like Tesla, government of El Salvador and Ukraine have already taken a position to move in that direction by accepting bitcoins as legal tender and I am sure there will be more as the time passes. Financial organizations are also taking positions in crypto currencies, albeit so slowly.

It has been 13 years since an unknown software developer birthed crypto by mining the bitcoin genesis block. To be sure there is much calculation involved in this mining process and it consumes large amount of energy doing the calculations. This is one of the biggest concerns many have, namely its impact on climate control. There are about 80 different coins available today (Bitcoin is the largest).

Some 40 million Americans have owned Crypto but to my knowledge nobody has used it to purchase anything (other than Tesla, perhaps) or make mortgage payment with it.

So, what is the big attraction? We all get attracted to anything that is appreciating in value no matter what the risk is; on most occasions we have not bothered to find out what the risk is or if it fits our value profile. And that seems to be the case with these digital currencies. Majority of the value in crypto coins is speculative. Some of you may recall the GO-GO days of mutual funds in 1960s and early 70s (and I will not even mention the Tulip Mania/Hype a few centuries ago). There was such hype and speculation about these mutual funds at that time that as a result, many people got hurt and lost money. Eventually, the mutual fund industry got regulated, well enough, by the Government agencies and now at least we have the tools to ask the right questions and decide on our own as to which mutual funds we should be investing in, should we decide to go that route for our investments.

Compared to 13 years ago, the price of the coins has moved up considerably, but at the same time it has seen many ups and downs and we almost have to keep scratching our heads to figure out why that is happening. It is totally beyond anyone’s control right now and that is what makes it most speculative. Millennials are a group that are most likely to invest in such coins. Social media and crypto talk go hand in hand for them; Millennials spend a lot of time online and for them investing in bitcoin, doge FWIW, Eithereum and other coins is in vogue, according to a survey from NORC, a research arm of University of Chicago.

Crypto investors tend to be young (38 average), more diverse than traditional stock investors and 61 percent started their crypto journey in the last 12 months.

The big thing they have on their side is time; they can experiment, play with coin investments, perhaps lose some money and still come out ahead; a luxury many others don’t have.

Before you invest any money into cryptocurrencies, should you decide to do it, establish basic objective of how much and how. Understand well that, more than many other investments you may have made, this one has the potential to lose your capital completely as it also has the ability to soar in value, at least for a short while. It is not a good idea currently to consider investing your IRAs or 401K money into this kind of investment (some retirement people are thinking about that).

Keep the total value small so that even if you lose everything, let’s say hypothetically, it will not alter your life goals or style. No matter how you look at it, today it is a highly speculative investment and none of your life goals should be dependent on this investment succeeding. I would be looking forward to what the Commission that President Biden has created. In my mind this new form of currency has to be controlled and regulated well so that we all play by the same rules and they are well known.

Volatility makes crypto currency an extremely risky proposition.

If you decide to go the Fintech route, Financial firm SoFi and broker Robinhood allow account holders to buy and sell various crypto currencies through their smartphone apps. The risk is that your crypto funds are not insured by FDIC or SIPC, meaning that, if the institution goes under, your funds are gone for good. Digital assets at any firm are not covered by any kind of insurance.

So, is this investment for you? I would say you can invest what you are mentally prepared to lose; because where we are in this game that is always a possibility. You must know yourself first; many Financial Planners spend much time just helping you understand your own risk tolerance level.

Mo Vidwans is an independent, board certified financial planner. For details visit, call 984-888-0355 or write to