“Is Crypto a Legitimate Investment?” with Mike Switzer and Allen Gillespie

Mike Switzer:

Hello and welcome to another edition of the South Carolina Business Review. This is Mike Switzer. A lot has happened in the cryptocurrency market over the past several months. So, we thought it might be a good time to check in with our resident crypto expert to get his thoughts. Allen Gillespie is Chief Investment Officer at FinTrust Capital Advisors. He joins us now by phone from his office in Greenville, SC. Allen welcome back to the program.

Allen Gillespie:

Glad to be here Mike.

Mike Switzer:

So, crypto market, thefts, scandals. Do you still believe in the crypto market? Will it continue to be a viable entity and investment?

Allen Gillespie:

Absolutely. I think last time I was on was right about the time the FTX scandal had broken. Since then, the market has rebounded a little over 100%. For Bitcoin, we have seen a lot of regulatory developments and more established players continue to expand into the space.

Mike Switzer:

So, speaking of regulatory developments, I believe on the table right now, the Securities and Exchange Commission here in our country, is the possibility of a Bitcoin ETF and that would maybe be good. What is the likelihood of that happening?

Allen Gillespie:

The SEC is definitely taking a “go-slow” approach. There are a number of established crypto firms as well as I would say more mainstream firms that have applications pending. Technology in the background is somewhat more difficult because crypto was set up to be decentralized and maximize user control. A centralized product, like an ETF, some of the complexities on the back end related to security of coins and technology on the back are a little more complicated. But the SEC seems to have cleared some hurdles and seems more open to that as a pathway. Certainly, people think that would broaden the appeal of it. At the same time, I think it loses some of the reasons the initial buyers were interested in the space.

Mike Switzer:

And another controversial aspect of crypto is the energy required to mine these coins. Has there been any development there with this? I know Ethereum, I guess they are probably ranked #2 behind Bitcoin, they are talking about or looking or trying really hard to move into a model that it would be different to not use so much energy.

Allen Gillespie:

Yeah, that’s correct. It’s what they call “proof of work” versus “proof of stake”. And the easiest way to probably explain that…lets just take a piece of property down near the port of Charleston. It would take a long time to go all the way back to the very first transaction where we had actual private ownership of property versus if we just went and looked at the last ten transactions. That’s a much quicker piece of work. So basically, you would take those prior transactions, people would account for them but they wouldn’t go back and reverify every transaction every time, which would lower the energy intensity quite significantly.

Mike Switzer:

And is this likely to become the new model then for crypto?

Allen Gillespie:

You know ultimately, I think different chains will use different models because they will have different purposes. So, some want higher rates of speed, you’re willing to tolerate a little bit more error in them. Other ones, accuracy will be at a premium and they will be used for larger, more significant transactions. And that’s the same reason why you do a title search on your house, right? You don’t necessarily do a full title search on a car, right? Because if something goes wrong with a house on the title, that’s a much more significant transaction. So, I think your different block chains, and that’s one of the reasons why there are so many different coins, will have different use functions.

Mike Switzer:

Alright. Anything new in the crypto market or on the horizon that we need to keep our eyes on?

Allen Gillespie:

Yeah, I think, really, two big ones. Obviously, I think the trial of the FTX folks. I mean that’s, again, I think the market cleaning itself up to a degree. And you’ve also seen some established players, Fidelity has now rolled it out not just for retail customers but advisory firms like ours. So, you’re seeing sort of established players. And then I think in terms of its performance as an asset class given the geopolitical environment. Obviously, it’s been a positive performing asset through this uncertainty which is the same sort of pattern we saw when North Korea was shooting missiles and things like that and other forms of political instability.  So, I think the crypto market is once again illustrating one of its utility functions. It is a non-correlated asset to traditional assets particularly in times of political uncertainty and stress. So, in that regard I think the recent market behavior is worth noting for investors.

Mike Switzer:

Well Allen, thank you so much for the update.

Allen Gillespie:

Thank you. Always good to be with you Mike.

Mike Switzer:

Allen Gillespie is Chief Investment Officer at FinTrust Capital Advisors. He joined us by phone from his office in Greenville, SC. Remember you can hear this show again at our webpage, southcarolinapublicradio.org and wherever you find podcasts. With the South Carolina Business Review, this is Mike Switzer.

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Securities offered through FinTrust Brokerage Services, LLC (Member FINRA/ SIPC) and Investment Advisory Services offered through FinTrust Capital Advisors, LLC. Insurance services offered through FinTrust Insurance and Benefits, inc.. This material does not constitute an offer to sell, solicitation of an offer to buy, recommendation to buy or representation as the suitability or appropriateness of any security, financial product or instrument, unless explicitly stated as such. Past performance is not necessarily indicative of future returns. This information should not be construed as legal, regulatory, tax, or accounting advice. This material is provided for your general information. It does not take into account particular investment objectives, financial situations, or needs of individual clients. This material has been prepared based on information that FinTrust Capital Advisors believes to be reliable, but FinTrust makes no representation or warranty with respect to the accuracy or completeness of such information. Investors should carefully consider the investment objectives, risks, charges, and expenses for each fund or portfolio before investing. Views expressed are current only as of the date indicated, and are subject to change without notice. Forecasts may not be realized due to a variety of factors, including changes in economic growth, corporate profitability, geopolitical conditions, and inflation. The mention of a particular security is not intended to represent a stock-specific or other investment recommendation, and our view of these holdings may change at any time based on stock price movements, new research conclusions, or changes in risk preference. Index information is included to show the general trend in the securities markets during the periods indicated and is not intended to imply that any referenced portfolio is similar to the indexes in either composition or volatility. Index returns are not an exact representation of any particular investment, as you cannot invest directly in an index.