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Sam Mickey – Boston Financial Advisor Talks About the Future of Cryptocurrency

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Sam Mickey - Boston Financial Advisor

Sam Mickey is a Boston, Massachusetts-based financial advisor and founder of Sam Mickey Consulting.  He provides customized tax-efficient financial, insurance, and estate planning strategies for individuals and their families, with specialization in the following:

  • Savings and Investments
  • Retirement and Estate Planning
  • Life Insurance
  • Long Term Care Insurance
  • Disability Insurance
  • Cryptocurrency

Sam Mickey’s began his professional career as a Research Analyst at 3i Capital Group, a leading international investment company focused on mid-market Private Equity and Infrastructure and later joined AXA Advisers, a global financial services company with $866 billion in assets under management (as of June 2018).

Sam Mickey successfully passed Financial Industry Regulatory Authority Series 7 and 66 licensing exams and is licensed as an agent for life, health, accident, and long-term-care insurance.

We recently spoke to Sam Mickey about his financial advisory practice and his outlook on the future of blockchain technology and cryptocurrency.

How do you explain Blockchain technology to someone who doesn’t know anything about it?

Blockchain technology is a peer-to-peer transaction verification system. Essentially, people set up their computers to be constantly processing the transactions on the cryptocurrency networks. This system allows for digital currencies to be sent and verified without the need of a central bank. Some of the main benefits of this system are that it is incredibly fast and keeps an ongoing record of every transaction, so that every digital coin is accounted for in quick order. Bitcoin transactions take ten minutes to be fully processed, whereas Litecoin can be processed in one minute, for example.

How would you describe Bitcoin to someone who doesn’t know anything about it?

Bitcoin is a form of digital currency that allows users and investors the opportunity to transfer money between peers in a low cost, timely manner. Because it does not rely on a central bank, it facilitates the easy transferal of assets both internationally and locally.

What is the future of cryptocurrency?

The volatile nature of cryptocurrency in recent times allows for these instruments to be seen as an attractive alternative investment class. While most investors have portfolios primarily consisting of stocks and bonds, it may make sense to consider investing in cryptocurrency as a small percentage of your overall portfolio. This will increase diversification as well as potentially subject you to higher returns with minimal risk. Most advisors would not recommend investing more than 5-10% of your investable assets into cryptocurrency. For this same reason, you are starting to see cryptocurrency Mutual Funds and hedge funds be implemented.

In the future, if prices stabilize more, cryptocurrency speculators predict that it will become a good store of value. The idea here is that you could buy some cryptocurrency and save it for a time where your cash needs increase, very similar to what a lot of investors do with gold and silver. This option is particularly attractive to people moving abroad, or even refugees or individuals without access to a banking system. All you need is one piece of paper with your private key in order to reload your accounts wherever you are.

What is the future of blockchain?

The future of blockchain technology is rooted in the fact that transaction settlement times in the United States is 3 days. This means that when you deposit a check, sell a stock, or exercise an option, you and your bank will not be able to have access to your cash until three days later. While this time is only two days in the European Union, it is still astronomical when compared to 1 or 10 minutes. Blockchain technology, could therefore be tied to the value of local currencies and implemented in a way that would tremendously reduce costs across the financial services industry. Things like wire transfer fees or interbank loans would be virtually free and the money could be put to its intended use much more quickly.

Can cryptocurrency work collaboratively with the traditional financial system?

As I mentioned before, cryptocurrency can certainly be used collaboratively with the traditional financial system. As it stands now, it is a wonderful opportunity to invest in a more volatile alternative investment, making it attractive to both mutual funds and hedge funds. Remember, volatility is not necessarily a bad thing, it creates a lot of opportunities for prudent investors to make money selling the highs and buying the dips.

Cryptocurrency can also work behind the scenes by using blockchain technology to transfer money more efficiently, limiting the costs of financial services companies greatly. This is where the real value of cryptocurrency seems to be, yet it has not been implemented yet.

What do you think Bitcoin will be to the world in ten years?

In ten years, I see Bitcoin as an attractive way for investors to store some of their money while diversifying their portfolio and potentially getting returns from it.

What are the advantages of cryptocurrency?

The advantages of cryptocurrency are mostly within its speed and efficiency. You could send money to yourself or a family member internationally and it will arrive within minutes. The decentralized nature of cryptocurrency is also one of its key selling points. Cryptocurrency is not subject to any specific political risks within your country, and it can be easily spent almost anywhere in the world.

How do you choose which cryptocurrency is best to invest?

Valuing a cryptocurrency is particularly difficult, as it is not a company earning money and providing dividends. There needs to be some sort of underlying value for any of this to make sense. With Bitcoin being the market leader, some of its benefits were apparent from the start, such as decentralization and efficiency.

When evaluating alternative coins, there are a few things that I look for. When choosing a cryptocurrency, it is important to understand what the intent of the original founder was. Litecoin, for example, takes the Bitcoin initial thesis and made it ten times faster. There is no need for many of the thousands of coins out there that are simply clones of Bitcoin. It is important for you to understand what is the purpose of the coin that you are investing in. There are typically white papers that you can read that go into further detail about this.

Like any investment, you want to see a proven track record. After understanding the basics of why this particular coin may provide value to the world, you want to take a deeper dive into how it has historically traded and managed. If a coin has an active consortium of well-established investors managing the protocols and the mission of the coin, that is a coin that would be more attractive. This is similar to the idea of selecting mutual funds based on how long the portfolio manager has been active.

The longer that the coin has been around, the easier it is to understand what the perceived value is. Typically, charts for cryptocurrencies follow a lot of the same trends as in the equities market. If a cryptocurrency has just experienced a long period of growth, it is likely there will be a selloff soon, for example. Another common theme is trading average prices. Oftentimes it is hard for an investor to see a coin break through its all-time high, so there is typically some resistance when approaching this price. You can therefore determine the value of most coins based on a combination of the historical trading patterns.

What steps should investors take to avoid fraud and to safeguard their digital assets?

There are a few things an investor can do to avoid fraud and safeguard their digital assets. The most important thing is to store your cryptocurrencies in some sort of offline hardware wallet that only you have access to. This is important because cryptocurrency exchanges have a history of being hacked and investors can lose all of their capital if they leave all of their coins online. Another important thing to note is that if you accidentally send your cryptocurrency to the wrong address, it is oftentimes irretrievable. It is important for investors to double-check before they perform any transactions and make sure they are sending it to the right place. With the appropriate and minor precautions, it is not difficult to protect yourself.

What do you think is the best use of blockchain technology right now?

The best use of blockchain technology is for sending assets extremely efficiently. There is no other technology on Earth that can offer the same speeds as the blockchain. If central banks and financial institutions could find a way to use this technology in tandem with what they are already doing, the benefits would be immeasurable.

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