Is Crypto Really a Currency? (It May Be RUINING Your Retirement)

You're being told crypto is the future of money. But if you believe that without understanding this one thing, you're putting your entire financial plan at risk. I've spent over 30 years helping people retire with confidence. And I've watched smart investors lose real money because they misunderstood what crypto actually is.

Stay with me for the next few minutes and I'll show you why crypto is not a currency and why that matters for your savings, your risk, and your long-term goals.

Let's just be real about it. It's not a currency.

Yeah.

Yet they call it currency.

It is slightly misleading.

Slightly misleading. We've talked about this around the firm a time or two. I think anytime you have misleading advertising or marketing, you're going to get a lot of people because they won't know the difference and they will fall for it because they're incredulous.

Yeah.

Or rather credulous, and they don't think about the reality of what's going on. They see this get rich kind of thing. They hear it. It sounds great. And things like, "Hey, get away from a central bank. Don't use a regular currency that probably is going to go away soon." There's lots of fear-mongering when it comes to crypto. And I think a lot of people have jumped in as a result.

Yeah. They've become very wealthy, some of them.

Yeah.

But we've also seen a lot who have become poor as a result.

It's true. There's just as many people losing everything in crypto as there are people that are making a lot of money. And some people have become really wealthy as it relates to Bitcoin. But let's be real. I think it's marketing because it's certainly not currency because it doesn't create stable value, right? Crypto can move 10%.

Mhm.

We saw it go from 125,000 in the last few weeks to 100,000 yesterday, Spell.

Yep. Yep.

So there's a huge move. So, there was a 7% decline in a day.

In a day.

Yeah. Right. That's not a currency.

Yeah.

Right. So it fails there. And just a few years ago in 2022, we saw crypto go from 75,000 to 15,000.

Mhm. Yep.

We're talking about a 70% move, right? Or maybe more. It's not a medium of exchange. So again, doesn't meet the tenets. And even though people call it a store of wealth, it's not a store of wealth because it's so volatile.

Mhm.

So that volatility goes back to the roller coaster comment. For me, it's marketing right now. It is truly a speculative class.

Yeah.

Or a speculative investment. And so to me, the marketing is what's driving all of it.

So you mentioned it's a speculative investment, which I would agree with. I don't think that it meets the three tenets of traditional currency, which are unit of account, store of value, and medium of exchange. So, I don't think that it fits that, but I do think particularly of late that it may be useful as an investment. So what role, if any, should cryptocurrency play in a wealth or retirement plan?

Right. So first let's think about what is a retirement plan, right? A retirement plan is something that we need to depend on at a certain point in life, right? So we have a finite period where we can get prepared for retirement, and then there's a finite period, although it's one that's unknown, right, to be in retirement. So, we got to be ready whether that's age 60 or 65 or whenever it is you choose to retire.

So I would say that as it relates to retirement planning, small allocation to Bitcoin, intentional core, core meaning a percent or two or three, not 50%.

Yeah.

Or even 100%. I've heard some people say, "You know what, I don't even have a retirement account anymore. I just use crypto." And for some people that might work.

Yeah, if you're 25 years old, if you have a lot of time and it could work, but that's a big play. That's a highly speculative play, Spell.

And I'm not going to just say that no, it shouldn't be in a retirement plan. I think it's okay. But diversification is not just simply adding more stuff. It's more about how do we derisk and still improve performance, right? Putting a roller coaster inside of your retirement plan may not be the smartest play, right? So, I think a small percentage, be intentional. And by the way, if extreme bouts of volatility bother you or keep you awake at night, you probably shouldn't do it.

I agree. Yeah, I agree. 7% swings in a day, that's a big swing. A huge swing particularly for those who are really batting for the fences and maybe have an allocation of 100% in the crypto space.

You and I drink coffee, right? We like a hot coffee in the morning, maybe.

Yep.

Let's say that you and I said, "In the morning, let's go meet at a coffee shop."

Okay.

Let's go have an espresso and think about what we've got to do throughout the day and talk a little strategy.

Mh.

I don't want to have the first espresso and by the time I order the second one it costs 10 or 20 or 30% more or maybe less.

No, who knows?

No, that's what crypto is all about. It can just change so abruptly. I can't imagine that being used as a currency at this point.

Yeah.

Not saying that it won't become that, but it's high risk, high vol or volatility. It's not there yet.

No, I don't think it is.

Okay. Phil, do you think investors understand the difference between owning crypto and actually using it as a currency?

No, I don't. I don't think that many people understand crypto, period.

Yeah, I think that's the third contingent that you mentioned already. I think you're probably right about that.

People, the reason I say no, they don't understand the difference between crypto from a transactional standpoint, crypto from an investment standpoint. I don't think they understand it because most people are not using it for transactions.

Mhm.

They don't really know how it's going to work.

Yeah.

And I can tell you straight away, if I'm selling goods, I probably don't want you paying me necessarily in crypto, if I have a fixed price on those goods that I'm selling and I know I need to make a certain margin, unless I have the ability to hold that crypto once you pay me, right? Who knows? You could pay me and in a few minutes it could be worth a lot less money unless I quickly turn it to currency, to a real currency, right?

So, no, I don't think they understand it. I think that people don't understand it purely because they're not using it as a currency. They are using it as an investment, calling it a currency.

Y.

And expecting that they will get to use it like a currency, but they're not using it that way today. Right. So, no, I don't think the... In fact, I think that a lot of more people should understand it before they dive into it. They should really. And blockchain technology in general, what it is, is not that hard to understand, but it does take some reading. It takes some studying of what this thing, this crypto thing is. And it's not just Bitcoin, right? Could be Ethereum, could be whatever. There's so... gosh, there's hundreds.

Oh, yeah. There's a bunch.

There's a bunch. But no, I don't think people understand it.

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