Family Wealth blog

Cryptocurrencies: Winter is Coming

An elderly couple with VR goggles on seem oblivious to the volatile cryptocurrencies chart and wintery scene behind them.

A Bitcoin of History

The first crypto currency to gain widespread trading and use as a digital currency was Bitcoin. An anonymous creator launched Bitcoin in 2009. Satoshi Nakamoto is a name now associated with Bitcoin’s creation, but that is just an anonymous “stage name” with ongoing speculation about which real person—or many—actually developed this currency.1

What are Cryptocurrencies?

Cryptocurrencies are unlike paper or coin currencies in several ways. For one, they are not issued by a central bank or any other government authority. For another, they are international by default. There’s no exchange rate between U.S. Ethereum and French Ethereum, because there’s only one Ethereum worldwide. By the way, Ethereum is the cryptocurrency with the second highest market cap next to Bitcoin. And, of course, there’s one more difference: they are digital only—no Presidents’ portraits needed. Today, after at least 2,000 cryptos have already failed2, over 12,000 such currencies are still in circulation.3

So, because cryptocurrencies are convertible into other, more traditional currencies such as the dollar, they are now widely accepted for business transactions. Even multinational corporations such as Microsoft and Whole Foods accept Bitcoin as payment, for example.4 But that doesn’t mean the whole world is moving to cryptocurrencies for everything. Investing in crypto has been far, far, far from a sure thing. But before going into that, it’s important to understand something about blockchain.

Blockchain is Not Crypto

Blockchain is the type of technology needed to make cryptocurrencies possible. Think of it as an electronic version of an accounting ledger written in indelible ink. Once a transaction is added, it is placed as a permanent link within the entire list of transactions. It can’t be changed or deleted or copied, so it keeps everyone honest (at least regarding the ability to play with the books!).

The use of blockchain technology is catching on for many business purposes such as contracts and intellectual property rights, so you shouldn’t think of it as being only for crypto currencies. And it is practically the opposite of crypto when considering stability and predictability vs. volatility.

Crypto Winter

Over the course of last winter, the overall crypto-currency market’s valuation dropped from a peak of about $3 trillion in November to under $1 trillion by late June.⁠5 Yes, your math is correct: the crypto “market” lost $2 trillion—two-thirds of its value—over the course of a few months. But the term “crypto winter” doesn’t just refer to what happened this particular time. It refers to any dramatic and sustained downturn in the crypto-currency world. Essentially, it’s the bear market for cryptocurrency that could definitely make a crypto investor’s blood run cold.

The Takeaway

So, why would a family wealth advisory firm even want to give an intro to cryptocurrencies? So that you’ll understand that we do know about them and do follow any important news about them that might affect the businesses that our clients have in their portfolios. But cryptos don’t come anywhere close to being similar to the solidly run companies we study enough to make long-term investment decisions about. If we’re careful to try avoiding any investment that could generate a loss over the long term, why would we ever recommend something where the entire market can lose two-thirds of its value in a matter of months!







Disclosure: This information is for educational and informative purposes and shall not be considered a specific recommendation. Readers are advised to speak with their advisor at JL Bainbridge to determine their specific recommendations that meet their investment objectives and to review their portfolios. The material being provided is thought to be accurate. However, the information is compiled from multiple resources and may become outdated or otherwise rendered incorrect by new research or corrections without notice. J.L. Bainbridge & Co., Inc., is not a broker dealer and does not offer tax or legal advice. Please consult your tax or legal advisor for assistance regarding your individual situation. It should neither be assumed that future results will be as profitable or that a loss could not be incurred. For more information related to our firm, please see our disclosure brochures at and

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