What New Regulations Mean for Your Crypto Investments

In this episode, financial advisor Wes Cuprill dives deep into the crazy world of cryptocurrency, exploring its mind-boggling volatility and the potential regulatory changes on the horizon. He breaks down why crypto might be more like gambling than investing, while still remaining curious about its future potential.

Chapters🕓
00:00 - Intro
00:14 - Welcome
00:34 - Crypto Regulation
01:45 - SEC Taskforce
02:38 - Skepticism
02:57 - Stability and Volatility
05:01 - Standard Deviation
06:10 - Sponsor
07:12 - Revaluation
07:55 - SEC Regulation
08:47 - Crypto Bias
09:33 - Historical Over-Hype
10:04 - Correction and Stabilization
11:02 - Final Thoughts
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Transcript

>> Wes Cuprill: 0:00

So with Trump in office, he's directed the SEC to finally put together a task force to decide what are they going toa do regarding the regulation of cryptocurrency. Hello there, and welcome to another episode of the WWW podcast. My name is Wes Cuprill and this week's episode is going to be more of a generic wealth wisdom episode. And I want to spend the time talking again about cryptocurrency. And my reasoning for revisiting the topic is because of some recent announcements from the government, it would appear that the US has begun the process of putting together regulatory frameworks for cryptocurrency. Now, this comes after years of the SEC overseeing cryptocurrency and enforcing various regulations without crypto actually having any standard rules in place for its regulation. Now, cryptocurrency companies have been asking for more formalized rules since the very beginning. It's their viewpoint that the existing securities laws in place don't apply to them because it does not expressly say that crypto is a security. And this, of course, has caused a lot of confusion. I mean, after all, Uncle Sam is always going to want to have its hands in the cookie jar'going, to want its cut, especially when it comes to taxes. And then ultimately they're going to want to be able to dictate some of the rules, some of the terms in the market of crypto currency. I'll get to that a little bit more in a second in terms of how I view the overall regulation of this. But what does this all mean? Well, just like everything, we don't quite know yet, the task force has been assembled by the SEC to sit down and put together the various regulations and the framework for enforcing those regulations. What exactly comes of this, of course, is yet to be seen. It'd be great if they're able to do this in Trump's first 100 days. However, I have a feeling it won't quite get to that point. I do believe that crypto is at the top of Trump's overall agenda. He's talked a lot about making the United States more of a crypto country, and he wants to establish a crypto reserve similar to the gold reserve that the United States has in place. But again, we'll see what happens. There's various odds makers out there that put it as less than 50% chance that any of this will get done in the first 100 days. But I certainly think over the next four years, we'll have a clearer picture of the regulations that are in place around crypto now, here's the thing. I still have my own skepticism around crypto. I will be the first person to admit that, yes, it does come a little bit from my overall lack of knowledge around the topic. But that's because, again, despite my research, I'm still kind of confused about what role crypto plays in the overall economy. My biggest issue is crypto being a viable security, let alone a currency. And that really revolves around crypto's inability to be a. What's called a store of value. The dollar remains the global standard when it comes to currency because of its overall stability. Yeah, the value of the dollar goes up and down compared to other currencies, but overall, the value is stable. You can store value in the dollar, and while inflation can erode that, inflation is a, normal occurrence in an economy. So the value of a dollar will decrease a little bit over time, but again, its price is overall stable. Cryptocurrency, on the other hand, is incredibly volatile. We've seen ever since its inception how much it's gone up and down. Now, part of this is because crypto, and I'm going to use Bitcoin a lot interchangeably with crypto, mostly because bitcoin is the number one coin that is talked about when we talk about crypto. But when it comes to securities prices, you know, there's various different methods for valuating different securities. One of those that I adhere to the most is the fundamental method taking a look at a company's overall financials and saying, okay, this is the value of the stock. There is something tangible to those numbers. Whereas with Bitcoin and other cryptocurrencies, a lot of it is speculative. It really just comes down to how much another person is willing to pay for it. And there's a lot of psychological mania, for lack of a better term, around its overall pricing. So we can't really say that Bitcoin has fundamental value. Now, again, the overall concept of money and whatnot, we can philosophically say, well, what is the fundamental value of it? There's a lot more that goes into pricing, say, a Procter and Gamble stock than there is that goes into Bitcoin. And, you know, speaking more about variability, a lot of this comes down to standard deviation. I've talked about standard deviation in past episodes. Basically, what it is is how much the price of one thing goes up and down around the meat. And the dollar since 1972 has a standard deviation of less than 5%, about 4.62%. It's very stable stocks. They have a variability for Looking at the S&P 500 standard deviation of about 17 18%. So a little bit more volatility. But what this means is that there's greater return than say, putting all of your money into currency. Bitcoin, on the other hand, has massive variability. It has a huge standard deviation. Bitcoin supporters often will just look at snapshots of time to talk about Bitcoin's variability. But in the early years, bitcoin had a standard deviation of over 200%. Again, stocks only 17% over history, but Bitcoin 200% in its early years. I mean, just looking at 2023 in a one year timef frame, it had a standard deviation of 40. Over a span of four years, from 20 to 2024, it was 73%. That's incredible amount of volatility. This episode of the Wealthwise Women podcast is brought to you by Money and Clarity. Wall street likes to make personal finance and investing complicated, but we are here to tell you that it isn't. But saving and investing for your future can bring with its stress, emotions and uncertainty, as well as many questions like how much do I need to have saved for retirement? What happens if the market declines? And probably the most important question of all, will I be okay? That's where we come in. Not only can we help simplify the financial planning process, we can also help guide you through all the emotions and uncertainty that come with planning for your future. So give us a call today at 513-563-7526 or go to visitwithm.com to schedule a free, no obligation consultation. We'll discuss how we might be able to help you achieve your financial goals and provide you peace of mind knowing that you will be okay. Yes, crypto can be used to purchase things, I get that. But it's not common. A lot of that is because of the fact that inventory would be revaluated constantly. The thing about valuing inventory and dollars, like let's say you go into the store and you buy something off the shelf, it has a very standard price. It's not changing every day because the value of the dollar remains constant. But if you're trying to buy something in bitcoin, one day it could be one bitcoin, the next it could be five. That's constant up and down. And here's the thing. Once it does become more common to purchase things with that means the government has come and apply that, they are regulating it heavily and they are also taxing it much to the same degree that they do other securities. So I'm not typically a fan of government oversight. I do believe in a smaller government. However, sometimes regulation does serve a purpose. And in this case I think it will be good for the SEC to come out with rules and regulations around Bitcoin because I think what it'll help do is standardize what Bitcoin can be used for and it will help sort of calm down the variability of it when we have a better understanding of what cryptocurrency is and what we can do with it. So I'm excited to see what the frameworks are that the SEC comes up with and the various decisions that they make, because I think it will help protect especially the average investor when it comes to investing in cryptocurrency, because again, I think it'll provide more understanding around what it is and what it can do. One thing to always remember is that when it comes down to people saying that crypto is going to quote unquote, the moon, you have to understand most of them are probably large holders in crypto. I mean, one of them is Coinbase and Exchange is CEO saying that, well, with the US goes to a crypto reserve system. I mean, the end price is limitless. Well, of course he's going to say that. It is very self serving. So you do need to be aware of that. I mean, when was the last time you heard of the dollar having the same sort of enthusiasm as crypto is currently seeing? I mean, you haven't. The dollar is an old boring thing, but that means it's stable, it means it's safe. Crypto, while being new and exciting, also comes with it some danger, if you will. You know, an overhyped enthusiasm is always a cautionary tale. It can go all the way back to the tulip mania of the 1400s, when tulip bulbs of all things, became hugely overpriced and it destroyed the economy of the Netherlands when it crashed. Then you have the, you know, all the real estate bubbles that have been out there, and I mean, I've talked about this the past episode, all of the various bubbles that have existed in history. I can't help but see that we are in one now. It's not to say that crypto is going to disappear and go to zero. No. But I certainly think I would not be shocked if down the road there is a correction and a stabilization of cryptocurrency as a result of regulation and a better understanding of what it does and what it can do. When that happens, you'll see less variability in the market and better returns over time. Well, not better returns over time. Let me preface that. But you'll have people saying, okay, there's less of a mania around it. We understand what it can do, and I think you'll have a more mature market in place as a result. So, you know, again, it's always good to remember that individual markets are out of our control. If you want to be invested in crypto now, by all means do so. But please understand that it is more akin to putting money down, to the craps table than it is, say, investing in the market in various indexed mutual funds that have shown by history that returns are a bit more regular. If you have any questions about this, please don't hesitate to reach out. I think it's a very fascinating subject and I look forward to learning more over time myself. But if you're somebody who is kind of unsure about crypto, how it fits in your portfolio, or just how various securities fit in your portfolio in general, please don't hesitate to reach out. Just go to visitwithm.com to book a day in time that works best for you. That being said, I hope you enjoyed this episode and I'll see you in the next one. Thank you.