We are receiving more and more questions about cryptocurrencies and the role they play in RPG Managed Portfolios. Frequently crypto questions center around whether or not this is a craze, or if the blockchain and cryptocurrencies are built to last. Are we seeing a bubble or will prices continue to soar? Is it too late? What does RPG think about crypto-currencies? Great questions. Certainly, we do not have all of the answers, but we want to take an opportunity to share some thoughts.
Fortunately, we do not need to be digital mining experts or know the future when it comes to regulations and expanded utilization of digital currencies. Rather, as investment advisors who focus on long-term value creation, we can acknowledge that we simply don’t know how to value digital assets, and thus we cannot offer them an allocation in client portfolios. Cryptocurrencies have become intertwined into our financial system and their usage continues to spread. Conceptually, we suspect they could well serve a purpose in our financial system for the long-term.
Short of a reliable methodology to value digital currencies, though, it is nearly impossible to understand how they contribute to long-term, goal-oriented portfolios. Some clients hold speculative positions of stocks, bonds and digital assets outside of their managed accounts, and we currently suspect this is the right place to hold reasonable positions in digital currencies.
Bottom line? Our goal is not to pass judgment on digital currencies one way or another. We can be confident that they do not yet have a place in client portfolios, for much the same reason that we do not have direct exposure to gold or oil in client portfolios: prices for commodities tend to be supply/demand driven, which makes their prices prone to speculation, a pricing environment where estimating a “reasonable prices is nearly impossible – remember when the price of oil went negative in March 2020? That said, our “idea door” is always open! Schedule some time to talk here, and let us know if you agree, disagree. We would love to hear from you on this topic!
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