Bitcoin Is Not Money

By John Schroder

Bitcoin as magic "Internet Money" is somewhat easy to conceptualize, and therefore, somewhat easy to mock or dismiss.  This book makes the case that such a simplistic framework misses much of the underlying potential of Bitcoin, and as such, can leave some financial planners thinking it has no role in a client investment strategy.  Besides being a form of money that is native to the Internet, Bitcoin is a protocol.  Its price action often behaves like a volatile tech stock, but with a 15 year track record, it is now the best performing asset in recorded history.  

 

With the recent SEC approval of multiple "spot" Bitcoin ETFs, it is apparent that Bitcoin is now going mainstream. These ETFs, managed by the biggest names in finance are bringing in entirely new investors to the crypto space.  Can Bitcoin be volatile?  Yes.  Is there opportunity in that volatility?  Yes.   So, love Bitcoin or hate it, financial planners must understand it.

• Language: English
• Publisher: John Schroder
• Release date: Mar 30, 2024
• ISBN: 9798227625984

Book preview

ACKNOWLEDGMENTS

Iam not a financial planner.  I carry no recognized certifications that are the hallmark of the traditional financial system.  You the reader may very well have more monetary based wealth than I do.  My voice as expressed in this book is simply the  amalgamation of approximately five years of Bitcoin related study and  is only possible because of some very insightful, prescient, and forward-thinking  people who now occupy the Bitcoin space.  To all of those who saw early on what Bitcoin could become,  thank you.

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forward

My dear friend and colleague has put a lot of thought into this purposely small book, and so I am honored to have been asked to write the foreword. I am the Founder of CryptoEd, a Portland State University Blockchain Board Member, and a 30 year tech veteran. John is a Naval Academy graduate, former Marine Officer, and a 20 year entrepreneur.  We first crossed paths years ago when we were both involved in the Telecom Expense Management (TEM) industry.  That we have both gradually migrated towards the crypto industry is not surprising to me, as the space is full of innovation, economic philosophy, and opportunity. 

This book Bitcoin Is Not Money—Actually It’s Much More will provide new insights and opportunities in the financial and Bitcoin domains. It is hoped that the reader will begin to comprehend Bitcoin and its numerous aspects related to financial principles and how it will open up entirely new business options and opportunities.

Within the domain of financial planning or portfolio management, Bitcoin has historically been regarded as a high risk asset to be ignored.  It now appears poised to be recognized as at least a medium of exchange but also as a groundbreaking asset with numerous applications. As such, it represents a paradigm shift in the financial environment, altering the concepts of investment, security, hedging, and decentralization, even beyond its monetary worth.

Financial specialists are beginning to see beyond market swings to comprehend Bitcoin and its peer-to-peer mobility. Comprehending its technological foundation, known as the blockchain, is crucial. The foundation of Bitcoin as a decentralized ledger that promotes security, immutability, and transparency while offering novel solutions that go beyond established financial institutions, is almost impossible to completely comprehend. 

Additionally, Bitcoin challenges traditional portfolio diversification tactics as a new asset class. Because of its restricted supply, similar scarcity to precious metals, and distinctive qualities, it presents opportunities and hazards that call for a careful approach when integrating it into traditional investment portfolios.

Beyond just being profitable, Bitcoin represents a philosophical position on financial sovereignty. Financial inclusion is promoted by giving individuals authority over their wealth, irrespective of geographical restrictions and middlemen.

But this revolutionary potential also entails volatility and regulatory uncertainty, necessitating caution and a well-informed approach. Hence, in order to effectively navigate the Bitcoin arena, financial specialists need to arm themselves with extensive knowledge, stay up to date on technical and regulatory developments, and use tools to reduce risks for their clients.

For professionals in the financial industry, Bitcoin is significant not only for its value as money but also because it represents empowerment, innovation, and the changing face of finance. It makes a case for a comprehensive review of conventional wisdom, pushing financial advisors to acknowledge how wealth and technology are changing.

My belief in this project of John’s is such that in addition to writing this Forward, we collaborated on a final chapter that delves into the tax implications of cryptocurrencies, which is an ever changing regulatory hurdle that wealth managers will need to be aware of. While neither John nor I claim to be the definitive source for anything crypto, it is my hope that this book will help pave the way for a whole new wave of interest on the part of those who have been entrusted with the financial future of others. 

Tanya Seda   January 2024  Tucson, AZ

INTRODUCTION

Many years ago, while the CEO of a small technology company, I was looking for warehouse space with a real estate agent who brought me, along with my brother, to a location in the small town of Purvis, MS.  This facility was about 10 miles south of our company’s location in Hattiesburg, MS, but the rental rates were presumably a bit better than what we could find closer to home.  Our company was in need of warehouse space because we were on the short list of vendors vying for a contract with the city of Philadelphia school system.  If we were awarded the contract, we were going to be setting up or kitting the tablets for all of their students, and we simply didn’t have the space for such an undertaking at our main office.

Upon entering the facility, one immediately heard a soft hum or buzz coming from the other side of the facility.  The agent explained that the humming was coming from hundreds, or possibly thousands of computers that were doing some weird thing with magic Internet money.  He didn’t really understand much about the process, but as far as he knew, these computers stayed on all the time, and the owners of all the computers somehow got paid with Internet tokens for the trouble of running all these computers.

As sourcing tablets for Philadelphia school students seemed much more lucrative to me at the time than some sort of magic Internet money, I ignored the noise, and gave it very little thought in the short term.  As it turned out, the sales rep we had hired to go after these large type of accounts was himself, a scam.  While he said all the right things, I don’t actually believe we were ever truly in contention for the contract.  I mention this here not to cause slander, but simply to point out the irony of that day:  I thought the computer money that was being mined was a complete hoax, a complete scam.  Instead, I was being scammed by a sales rep who had led  me to believe that we were a few short steps away from a highly lucrative, and company changing contract. 

For those who have paid any attention to the crypto space over the past few years, it is perhaps obvious that scams are a perhaps a bit more frequent than in traditional finance.  As an advocate for the crypto space, I certainly hate that this is true.  I myself have not been immune to some of these problems that have plagued the space.  Sam Bankman-Fried and his FTX exchange never seemed right to me, so I was never sucked into his orbit, but I did lose money with a project called Terra Luna and the stablecoin used on its network called UST.  This was particularly painful, because I had moved into this stablecoin because it was like a digital dollar, but in this case, an algorithmically backed token that was supposed to always maintain its peg to the US dollar.  In other words, this was my safe play while the broader markets were headed down.  I was thinking I was really a brilliant investor because I’d largely gotten out of Bitcoin and was now in something safer, ready to get back in when the markets turned bullish again. 

I mention one of my own mistakes early on because on some level, I think it’s a bit of a badge of honor.  If you can find a crypto savant or sherpa to guide you through this space who has no scars, I’d question their worth.  This space