Trading in Code
Florida's bid for bitcoin
Crypto can make it easy to conduct transactions across borders, he says, and then there’s the everyday investor. “A lot of my younger clients, maybe 30 and under, 35 and under … I did an informal survey and 70% had some sort of crypto holding, big or small, but they had something. Maybe that’s a little FOMO — fear of missing out. They hear everyone talking about crypto so they buy some or they see the astronomical gains and people just want to try get a little piece of that.”
Many clients, he concedes, still struggle with the concept. “People don’t understand it, and certainly they won’t feel confident in engaging in any type of business transaction with it,” Shields says.
They have good reason. Crypto’s tax treatment by the Internal Revenue Service — the IRS considers cryptocurrency to be property — can create tax headaches, and wild price swings make it next to impossible to rely on it as currency in the same way as people rely on dollars or yen, he says.
While bitcoin started trading at about 8 cents per coin in 2010, it surged to nearly $20,000 in December 2017 and then traded at less than $10,000 for the next couple of years before reaching a record high, topping $63,000 in April 2021. As of early August, it was trading at about $39,000 a coin. “If crypto is a currency, it should be a stable value, and right now it is not quite there,” Shields says. “That’s why crypto is not mature enough yet to act as that stable store of value. Where the valuation fluctuates 50% in a given day and if Elon Musk tweets an emoji and that changes the price — that’s not a mature market.”
Regulatory crackdowns also pose a risk. “There are authoritarian repressive governments in this world that will not allow their citizens to own cryptocurrency because they lose control, quite frankly. Some people in the U.S. see regulation as a good thing because that gives it some legitimacy, but you have a country like China which prohibits cryptocurrency ownership. Some other Asian countries have had different varying regulations on crypto, and, unfortunately, you’ve had some spectacular crypto failures, where companies have gone bankrupt and people have lost all their holdings, and some fraud,” Shields says.
Meanwhile, Gary Gensler, chairman of the U.S. Securities and Exchange Commission, said in early August his agency would attempt to regulate the cryptocurrency market as much as possible and called on Congress to give the SEC more authority. “We just don’t have enough investor protection,” Gensler said in a statement, saying cryptocurrency markets were full of “fraud, scams and abuse.”
Many question bitcoin’s viability as a currency alternative because of its price volatility and questions about regulation. Warren Buffett, chairman and CEO of Berkshire Hathaway, has derided bitcoin as a “mirage” and a “gambling device.” In a series of tweets, Jackson Palmer, a software engineer who co-created the cryptocurrency dogecoin as a meme-inspired joke in 2013, recently slammed the crypto industry as a “powerful cartel of wealthy figures” that “leverages a network of shady business connections” to prey on the “financially desperate and naïve.”
Shields believes crypto is here to stay but embraces a “caveat emptor” approach to it. “I think this is very much a 21st-century technology that governments will try to regulate with 19th-century philosophies, so it is very much buyer beware. If my mom ever told me she’s purchasing dogecoin, then I’m going to get very nervous,” Shields says.