Tales from the Crypto: Omnia Co-Founder Michael Wagner Speaks to PAM About Clients and Cryptocurrency

Cryptocurrencies such as Bitcoin have captured the attention of many investors. Omnia Family Wealth Co-Founder Michael Wagner recently spoke to Private Asset Management (PAM) and offered insight for those looking to invest in cryptocurrencies. He also shared advice for other advisors whose clients are also getting curious about this volatile, unregulated and often difficult-to-understand asset.

First, PAM explains what Bitcoin and blockchain technology is all about.

“A crypto transaction works is something like this: One user sends an order to the network detailing the transaction he or she wants to make. This request gets combined with other transactions into a block. A group of folks called miners verify the authenticity of the transactions in the block through completing complex mathematical operations. Once the block is verified, it is added to the chain and is, for all intents and purposes, set in stone. Then the recipients get their money, while the miners receive some cryptocurrency as an incentive to continue their work,” writes PAM. “Growing interest in crypto has seen prices skyrocket, with bitcoin seeing gains of over 1000% in 2017 alone. Bitcoin’s success has spawned over 50 competitors and imitators as well as numerous “joke” cryptocurrencies.”

Given the potential of blockchain technology, combined with the media’s fascination with Bitcoin, it’s no surprise clients are asking their advisors about cryptocurrencies.

“It comes up frequently enough that I’ve joked about putting a bell in the office that rings when a client mentions it,” Wagner tells PAM. “We have people ranging from the merely curious, to people who have made sizeable investments into crypto assets. People are really curious about it, and it’s a real social phenomenon.”

Wagner also shares his philosophy on how to avoid getting caught up in the day-to-day volatility of cryptocurrency. “Whether it’s crypto or anything else, we tell people to focus on what you can control,” he says. “It’s the best way to stay sane. What you can control is the risk of your exposures, the taxes and expenses. Focus on these things and be cold and unemotional when you foray into the crypto world.”

Speculative markets tend to promote unhealthy investor behavior, according to Wagner. He has specific reservations about the 24/7 nature of the crypto market, warning clients to resist the urge to stay up until all hours on a trading binge.

Another consideration is the lack of government oversight in the space. Yet despite the regulatory uncertainty, Wagner says clients shouldn’t assume Uncle Sam is looking the other way entirely. “Regulators and the Internal Revenue Service are going to be looking at the gains in crypto assets this year,” Wagner warns. “You need to be documenting things and pay your taxes on this.”

While cautious, Wagner says he is ultimately a believer in the future of crypto. “The underlying technology is truly revolutionary and will change the way a lot of businesses and people operate in the future,” Wagner says. “But it’s too early to say that investing in any one crypto asset is better than any other.”

The full article is available to PAM subscribers here.

 

Important Disclosures:  Omnia Family Wealth, LLC (“Omnia”), a multi-family office, is a registered investment advisor with the SEC. This commentary is provided for informational purposes only. No portion of any statement included herein is to be construed as a solicitation to the rendering of personalized investment advice through this communication. Consult with an accountant or attorney regarding individual tax or legal advice.