Financial Focus: Ready for Bitcoin?

I am humbled enough for the last seven years of my life to apply my 26 years of experience as a financial advisor, now to students, in the public educational and university system.

A very interesting discussion happened recently in one of my classes, where the average age is 34.

“So, bitcoin is now better currency than the US Dollar. Do you see how much it has gone up in the last year? My local brokerage company says I can buy some from them today and I’m thinking about it! Don’t you agree Prof. Rivieccio?”

Bang! That truly was a Kodak moment! After long thought, I put my hands in my pocket, felt currency and knew what I wanted to say.

Firstly, Bitcoin is not hard currency!

Bitcoin is a digital token that can be sent electronically from one user to another, anywhere in the world.

It is tracked, not by a company, but by a decentralized network of computers around the world that keep track of all Bitcoin transactions.

Bitcoin was first introduced in 2008 by an unknown creator going by the name of Satoshi Nakamoto, who communicated only by email and social messaging. Satoshi, allegedly, created the original rules of the Bitcoin network and then released the software to the world.

Bitcoin first whisked around the world in 2011 after drug dealers began taking payments on the defunct black market website known as the Silk Road.

Today, you can buy Bitcoin. There are companies in most countries that will sell you Bitcoin in exchange for the local currency. You can link your bank account or credit card and then buy & sell the coins for dollars. Opening an account is similar to opening a traditional bank or stock brokerage account. Today, Bitcoin records contain all balances and transactions, and stored on every computer helping to maintain the network — more than 10,000 computers of October 2017.

If the government made it illegal for Americans to participate in this network, the computers and people keeping the records in other countries would still be able to continue. The decentralized nature of Bitcoin is also one of the qualities that have made it popular with people who are suspicious of government authorities.

So, bottom line: Is it safe and legal?

It seems only a small percentage of all transactions on the Bitcoin network are now illegal. Most transactions are people buying and selling Bitcoins on exchanges, speculating on future prices. A whole world of high-frequency traders has sprung up around Bitcoin.

People in countries with high inflation, like Argentina and Venezuela, have bought Bitcoin with their local currency to avoid losing their savings to inflation.

One of the most popular business plans is to use Bitcoin to move money over international borders. Large international money transfers can take weeks when they go through banks, while millions of dollars of Bitcoin can be moved in minutes.

Yes, it was a long walk around the chalkboard! Most of my students brought about some of the highlights above. I guess, being a 57-year-old advisor who likes the idea of “prevention first” warned her of some of the pitfalls. One student, asked me to be more specific! More walking around the blackboard. Then I took out my coins and dollars in my pocket.

“Well, firstly as we just discussed, I believe the international markets took an illegal site and had to make it legal because of international access. In the end, The many good will outweigh the bad. But I can feel and see this (USA) currency. Until that changes, I’ll stay with the US Dollar, thank you, known around the world.”

After class, I had to go pick up some documents at my professional work office before retiring for the evening. This question was still on my mind. Maybe because I stopped off to an ATM and just transferred my money back, which I guess is now digital.

When I got back to the office to a relieving voicemail,  Hi Anthony, just want you to know I just received my IRS check into my bank account. Thank you.”

Think about that a minute! She said “her check.” She also said “her bank account.” Again, digital money!

So, I finally said, OK Anthony, it’s Bloomberg Terminal time. Bitcoin, year over year, is 400 percent an average of 35 percent, over the last 15 years.

US dollar, year over year, well that becomes both very good and very complicated. It is hard currency that is acceptable around the world but, of course, it fluctuates as it is exchanged around the world. Also note that the US dollar is also affected by inflation, both domestically and abroad. Just using US-based numbers, it would be safe to say 3 percent, and 47 percent in value, on average, over the last 15 years.

Hello dollar, I’ll just put you pack in my pocket where you belong!

I guess, this conversation is not over with my class (or my partners), yet.

So far, though, these practical applications of Bitcoin have been slow to take off.

Anthony Rivieccio is the founder and CEO of The Financial Advisors Group, celebrating its 20th year as a fee-only financial planning firm specializing in solving financial problems. Rivieccio, a recognized financial expert since 1986, has been featured by many national and local media including: Klipingers Personal Finance, The New York Post, News 12 The Bronx, Bloomberg News Radio, BronxNet Television, the Norwood News, The West Side Manhattan Gazette, Labor PressMagazine, Financial Planning Magazine, WINS 1010 Radio, The Bronx News, and The Bronx Chronicle. Anthony is also an adjunct professor at City University of New York, teaching Personal Financial Planning. For financial assistance or a FREE 2017 Income Tax Analysis. Anthony can be reached at 347.575.5045.

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