One financial advisor's bitcoin journey

  • Boneparth, a bitcoin miner, hasn't advised clients on cryptocurrency investments because of regulatory scrutiny and a desire to not let his personal experience influence their decisions.
  • The lesson he is willing to share is that he regards such investments as entertainment, and experimenting with money that he can afford to lose.
  • The same breakdown between risk and reward that could plague any investor apply to cryptocurrencies.
An image of Bitcoin and US currencies is displayed on a screen as delegates listen to a panel of speakers during the Interpol World Congress in Singapore on July 4, 2017.
Roslan Rahman | AFP | Getty Images

By now, even your grandmother probably knows what a bitcoin is. If that's not a sign of something going mainstream, I don't know what is.

As a financial advisor, I've found it interesting these past months to talk about bitcoin in a professional setting. When I do, I always explain that, no matter how exciting the "crypto-hysteria" may seem, it is speculative. Ultimately, one must remember the intimate relationship between risk and reward. Ignore it, and you could find yourself disappointed or, even worse, broke.

Most of my clients don't know this, but I've personally owned bitcoin since 2014. My stash sits securely in my digital wallet, untouched since the day it was deposited there. Back then, I split the cost of a glorified computer — called a "miner" — with a childhood friend, and this machine generated us a finite amount of digital money. So long before your grandma knew what a bitcoin was, I've been riding this roller coaster.

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However, I've been keeping mum about my position in bitcoin for two reasons. First and foremost, from both an advisory and compliance standpoint, this subject is under strict regulatory scrutiny; it's a bad look in either department to rant and rave about speculative trends. Second, I had not quite figured out how to use my bitcoin experience in a way that would be constructive for my clients. The last thing I'd want is for my story to unduly color their biases. But now, more than a few years in, I think I've extracted the lesson to share with them and everyone else.

From the beginning, I thought about our miner as form of entertainment — never as an investment. The cost of the machine was something I could afford, and I was excited to embark on another adventure with an old friend (who happens to be a neuroscientist with a knack for these things). I cut the check like I had just left an ATM in Vegas, prepared to hand over my money to either hit it big or crap out. I'd be lucky to come out on top, but most importantly, I never play with more money than I am willing to lose.

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We have arrived at a point where bitcoin's entertainment factor has masked the reality that it's risky business. To jump on the roller coaster today, the average American investor would not likely be playing with the kind of money you bring to the penny slots. They'd be playing with their savings or student loan payments. And most lack the education about their own financial situation to put this into context. It's this inability to separate what's entertaining from what makes sense that gets people into serious trouble.

You see, even though cryptocurrencies are "new," their risks are not. Therefore, the same breakdown between risk and reward that could plague any investor would apply. So now, if you ask me for my impression on cryptocurrency, I'll tell you my story: That I'm keeping my arms and legs inside the ride at all times — but I'm not going to decide whether you should buy a ticket.

— By Douglas A. Boneparth, president of Bone Fide Wealth and co-author of The Millennial Money Fix

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