Episode 188: Cryptocurrencies: Lessons And Perspectives with Phillip Blows
Phil Blows is an expert in financial planning and wealth management. He has been involved in the crypto market for years and spent four years speaking to over 10,000 retail investors about how they manage their money and then designed AQRU - which he is the co-founder and CEO. The AQRU PLC is a business specialized in helping institutional and retail customers, simplifying the crypto buying journey by making it safe and accessible for everyone. Phil is also the author of a personal finance book, "The Money Triangle: 3 Simple Steps to Transform Your Finances And Achieve Financial Freedom.”
According to Phil, 95% of crypto coins will die - however, only 5% that lives will change finance forever. In this episode, we’re going to talk about raising money through specs and the wild trials and tribulations of the crypto market - as in the second half of 2022, it is down about 70% from the highs. Whether or not you are familiar with crypto, this is a great episode for you to understand this market and how to invest in it.
Do Not Measure Crypto Like The Traditional Market
Phil explains that crypto is a digital financial asset, which is hard to measure. In a lot of aspects, cryptocurrencies work in the same way as the traditional financial markets; you can lend assets and you can borrow them. Unlike the traditional market, crypto moves faster, which makes it very unstable.
In an economic crisis, the traditional financial market takes, on average, about 18 months to overcome the bear market. The same logic does not apply to crypto, as it occupies much smaller space and the pace of innovation is 20 times faster—one year in crypto is like 20 years in traditional finance.
How to invest in crypto safely? People interested in this investment must do their homework by observing how this currency has performed in the past and using this as a reference. The advice to profit from this is to identify potential successes versus failed investments.
Crypto Trends: Regulation
According to Phil, there are two upcoming trends in this cryptocurrency: First is the use of different collateral types to bring what are currently dead assets into the financial blockchain and the second is the increase of regulation.
In theory, crypto is a libertarian currency, which means that regulators should not interfere with its functioning. Phil counters this assumption: You shouldn't trust billions of dollars to people whose background you do not know. As in every market, there are frauds in this space and predatory activities going on.
Regulations make it clear what financial institutions can or can't do, so the average consumer feels safe investing - they will know who to go after if they fall for a scam. As crypto has no real money on the market yet, these regulations will be beneficial to attract more investors.
What Are The Risks Of Investing In Crypto?
Everyone does not generate yield in the same way, which makes the risk profile poorly understood by a lot of investors. There is a yield curve in crypto as there is in traditional money. The longer you lend something to someone, the higher the yield you’re going to receive for that period.
It is common for players to stop their investments because of uncertainties. It's complex to understand the yield in crypto. There is a lot of speculation. Investors may have the impression that they have entered the classic liquidity trap. They need to generate yield on it, just like a bank would, by lending out assets to other counterparty institutions that have capital-intensive businesses that need liquidity.
Phil’s company, AQRU, helps with this transparency. He believes that this level of transparency of crypto will attract people who invest traditionally, especially in the economic crisis. Imagine if you had this level of transparency during the 2008 financial crisis when you could see a live assessment of the bank’s P&L.
Should I Invest In Crypto In An Economic Crisis?
Let’s be honest, we have never seen crypto in an inflationary environment, but that doesn't mean you shouldn't invest. Pay attention to the type of investment you are getting involved in and the amount of capital that you are putting into play. Phil advises that new crypto investors are getting the highly concentrated version of crypto when they should get the balanced version of crypto. As an example of his portfolio, Phil says he does not want 10% daily volatility. He owns 50% of crypto assets currently sitting in crypto that are pegged to the dollar value. In the other half, 25% of it is not a trend-following system. To get into crypto, Phil says we should understand that it should be only 5% or 10% of your investment portfolio.
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Corey Kupfer is an expert strategist, negotiator, and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author, and professional speaker. He is deeply passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.
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