by John Darer CLU ChFC MSSC CeFT RSP CLTC
I recently encountered a Internet troll who "must be" a spokesperson for "Bitcoin or Stupid Shit?", because anyone who reads our blogs, knows what we do, what people in the settlement planning industry do, including that judges that must approve minors' settlements, understands that an investment that has a 121% annualized rate of return over 10 years with a 181% standard deviation* might not be the most suitable investment for injury victims. And apparently it's not suitable enough for a large allocation for everyday investors either, according to Ray Dalio.
Laws restrict investments for minors and incompetents
In statistics, the standard deviation is a measure that is used to quantify the amount of variation of a set of data values. Used above as a measure of volatility
Warren Buffett gives his most expansive explanation for why he doesn’t believe in Bitcoin
"If you offered me all the bitcoin in the world for $25.00, I wouldn't take it", if doesn't convince you bitcoin is a scam I don't know what would.- Warren Buffett , Berkshire Hathaway annual meeting April 2022, covered by CNBC
“In my life, I try and avoid things that are stupid and evil and make me look bad in comparison to somebody else – and bitcoin does all three,” Munger said. “In the first place, it’s stupid because it’s still likely to go to zero. It’s evil because it undermines the Federal Reserve System ... and third, it makes us look foolish compared to the Communist leader in China. He was smart enough to ban bitcoin in China.” Charlie Munger, Ibid.
Billionaire Investor and Hedge Fund Manager Ray Dalio Said About Bitcoin
1. According to billionaire investor and hedge fund manager Ray Dalio, it’s reasonable for everyday investors to hold a small amount of bitcoin, the largest cryptocurrency by market value. On a recent episode of the We Study Billionaires podcast, Dalio was asked by co-host William Green whether allocating 1% to 2% of one’s portfolio to bitcoin was reasonable. “I think that’s right,” Dalio replied. Dalio has served as co-chief investment officer of the world's largest hedge fund, Bridgewater Associates, since 1985. Dalio is regarded as one of the greatest innovators in the finance world, having popularized many commonly used practices, such as risk parity, currency overlay, portable alpha and inflation indexed bond management.
2. Crypto Freefall Gives Retirement Plans New Reason to Avoid Risk [Bloomberg May 17, 2022]
"Upheaval in the cryptocurrency market puts teeth in a US Labor Department push to discourage retirement plans from adding digital assets to their 401(k) plan lineups. Crypto markets lost more than $270 billion just weeks after the department’s Employee Benefits Security Administration issued strongly worded guidance (CAR No. 2022-01) all but banning retirement plans from offering crypto assets.
3. On June 29, 2022 an article by Alex Hern and Dan Milmo appeared in The Guardian with the headline "Crypto crisis: how digital currencies went from boom to collapse "Savers talk of devastating losses as assets such as bitcoin and ‘stablecoins’ like terra fell sharply"
4. On August 1, 2022 Nerd Wallet published an article "After a Fall, Crypto Winter Sets In"
6. If that's not enough, on April 26, 2022, the New Jersey law firm of Console & Associates discusses data breaches related to crypto
"Over recent years, Bitcoin, Ethereum, Litecoin and other cryptocurrencies have surged in popularity and value as more and more people see the value that the asset class presents. However, hackers see the fact that everyday investors are now holding cryptocurrency as a major opportunity. In fact, over the past year, there have been several high-profile cryptocurrency hacks resulting in the loss of more than $14 billion dollars".
7. Comedian Bill Murray loses $186,000 to hackers Bill Murray recently held an NFT auction in which most of the recouped funds were in the said wallet. The statement showed that the hacker drained 90% of the entire funds in the wallet, leaving just a little over $500 in the wake of the act. Cryptopolitan September 3, 2022
8. May 12, 2022 New York Post reports "Bitcoin’s plunge slashes the fortunes of major crypto billionaires", the Winklevoss twins lost 40% of their respective fortunes, more than $2 Billion each at the time the story was poublished in the NY Post.. Sam Bankman-Fried, the founder and CEO of crypto exchange FTX, has lost roughly half of his on-paper fortune since March and is now worth about $11.3 billion". Crypto billionaires losing fortunes as bitcoin tumbles (nypost.com)
9. "We've only scratched the surface of how bad the crypto crime wave has gotten June 13, 2022 LA Times by Matt Pearce
"These are tough days for cryptocurrency investors. Values are cratering. Prominent crypto firms are faltering. And it's coming after a massive surge of criminal fraud that has been pummeling crypto users with unknown billions of dollars in losses with little relief in sight"
10. Bitcoin is down roughly 60% this year and some other tokens have lost even more. The ninth month of the year has historically been one of the worst for the largest cryptocurrency, falling every September since 2017. Bitcoin has averaged an 8.5% drop for the month over the past five years, according to Bespoke Investment Group". August 31, 2022 Bloomberg
11. Says Fort Lauderdale's and Owings Mills Maryland's Richart Ruddie (also self-styled as "Richart Ruddie Annuity"), a bête noire of sorts in structured settlement circles due to his association with JRR Funding, AnnuitySold and related companies, which were banned from doing business in Maryland for 7 years from January 2018 for fraud:
"Losses of Bitcoin Value – As the shining light of the cryptocurrency industry, Bitcoin advanced in value to a high watermark of $69,000, but the erosion of that value has declined since November of 2021. The currency currently trades roughly around the $20,000 mark a high mark in 2018 that now feels like a low mark for the worlds most well known coin. That’s almost an 80% loss in just over 6 months".- The Crypto Updates July 12, 2022
On a $1,000,000 investment that's a $800,000 loss. Could you handle it emotionally? What if you were not physically able to work? What if that money represented compensation for the loss of your spouse, parent or child?
12. Bitcoin, Ethereum Nosedive: $445M Liquidated From Crypto Market (msn.com) September 19, 2022
Bitcoin Loses Steam Bitcoin is currently trading at $19,100, down 14% in the past week and down by around 4% over the past 24 hours. The world’s largest cryptocurrency is now down by a staggering 75% from its all-time high in November 2021 when its market capitalization was $1.27 trillion. It is now down to $366 billion.
I dont think it's really necessary to go on. Is this the kind of volatility that a vulnerable class of investors should be exposed to?
The "Bitcoin-Shitcoin" Expression
Next time someone tries to "poo-poo" the renewable credentials of Bitcoin mining, remember AmityAge Mining Farm. Founded by Gabriel Kozak and Dušan Matuska, the Bitcoin mining facility uses human and animal waste to generate electricity for mining". According to Matuska, using renewable energies such as biogas “shows that we can really accelerate the adoption of these renewables and make their return on investment higher in the end,” while it’s also a cheap energy source. An ecologically sound and low-cost way of generating electricity, biogas electricity plants convert waste into methane gas due to a fermentation process. The gas is then burned as fuel". Read the full story here
Sidney Vee, the Bitcoin troll missed this, but scoured the Wayback Machine to focus on a long since deleted post titled "Bitcoin-Shitcoin", selectively overlooking the criticism of Henrique Vicente... whose "Cryptocurrency Tulipmania: Bitcoin is a shitcoin" was published May 10, 2021. In 2020, John McAfee opined that "Bitcoin is the true Shitcoin". Oh dear!
While I understand that a "Bitcoin v Stupid Shit" "spokesperson" might get their knickers in a twist, the above suggests there is plenty of support for use of the term in the long deleted post. The fact that the troll decided to spend his spare time going into the Wayback Machine is something else altogether. Let it go Chuck. The numbers and volatility speak for themselves. Did the troll stay in bitcoin or did they take a 75% loss?
It's Unlikely that Judges Would Ever Approve a Crypto Investment of a Minor or Incompetent Person's Settlement
My message is clear in prior posts. The volatility of Bitcoin and other crypto are generally not suitable for injury victims and probably would not be approved for injury victims where court approval of settlement is required. For example see New York CPLR § 1206. Disposition of proceeds of claim of infant, judicially declared incompetent or conservatee, which states:
(c) the court may order that money constituting any part of the property be deposited in one or more specified insured banks or trust companies or savings banks or insured state or federal credit unions or be invested in one or more specified accounts in insured savings and loan associations, or it may order that a structured settlement agreement be executed, which shall include any settlement whose terms contain provisions for the payment of funds on an installment basis, provided that with respect to future installment payments, the court may order that each party liable for such payments shall fund such payments, in an amount necessary to assure the future payments, in the form of an annuity contract executed by a qualified insurer and approved by the superintendent of financial services pursuant to articles fifty-A and fifty-B of this chapter. The court may elect that the money be deposited in a high interest yield account such as an insured "savings certificate" or an insured "money market" account. The court may further elect to invest the money in one or more insured or guaranteed United States treasury or municipal bills, notes or bonds. This money is subject to withdrawal only upon order of the court, except that no court order shall be required to pay over to the infant who has attained the age of eighteen years all moneys so held unless the depository is in receipt of an order from a court of competent jurisdiction directing it to withhold such payment beyond the infant's eighteenth birthday. Notwithstanding the preceding sentence, the ability of an infant who has attained the age of eighteen years to accelerate the receipt of future installment payments pursuant to a structured settlement agreement shall be governed by the terms of such agreement. The reference to the age of twenty-one years in any order made pursuant to this subdivision or its predecessor, prior to September first, nineteen hundred seventy-four, directing payment to the infant without further court order when he reaches the age of twenty-one years, shall be deemed to designate the age of eighteen years; or (d) the court may order that the property be held for the use and benefit of such infant, incompetent or conservatee as provided by subdivision (d) of section 1210.
Structured settlement annuitants receiving stable tax exempt income from a structured settlement, should not be groomed into selling structured settlement payment rights to zealous pennies on the dollar merchants from in South Florida or Maryland to put into volatile investments with a 181% standard deviation.
"Cryptocurrency firms including Coinbase Global Inc., Galaxy Digital Holdings Ltd. and MicroStrategy Inc. all plunged more than 25% last month. The declines added to the pain of a dismal year amid a deep and extended plunge in Bitcoin and other digital tokens. While that trio of firms rallied this week, they’ve still wiped out roughly $52 billion of shareholder value in 2022".
Last updated December 16, 2022