Welcome to this week’s mailbag edition of The Daily Cut.
It’s where you and your fellow readers get to put your most pressing questions to Teeka Tiwari, Jeff Brown, Dave Forest, Nomi Prins… and the rest of the Legacy Research team.
This week, bitcoin (BTC) is at the top of our minds.
That’s because the cryptocurrency is more than a financial speculation.
As I (Chris Lowe) began showing you yesterday, it’s a rare form of money, along with gold, that’s nobody else’s liability.
In contrast, the money you “have” in the bank is nothing more than an IOU.
The bank promises to pay you whatever amount you have in your account when you go to withdraw it.
But as everyone knows, promises are hard to keep.
Bitcoin and gold, however, are “bearer assets.” Whoever bears them owns them. It’s that simple.
There’s no commercial bank or central bank involved in storing them or facilitating transactions. That makes it a lot harder for governments to sanction them… the way they can sanction bank accounts.
And for folks trying to survive a war, they’re a lifeline.
Take it from Artyom Fedosov. He’s a Ukrainian fleeing the Russian invasion. As he tweeted on February 25…
My Ukrainian credit cards don’t work anymore. I’m safe physically in Kazakhstan but all my savings are gone.
Crypto is the only money I still have, and today I can say without exaggeration that $BTC, $ETH, and #NFT are going to save my life while I can’t come back home.
For newer readers, those abbreviations are references to bitcoin… the world’s second-largest crypto asset, ether… and non-fungible tokens. NFTs are a type of crypto that allows you to verify the ownership of digital goods such as artworks on a blockchain.
What Artyom says makes sense.
As Putin’s war ravages Ukraine… and takes down the Russian economy… bitcoin is one of the only ways ordinary citizens in these countries can hold on to their wealth.
The Russian ruble is down about 30% versus the dollar since the start of the year… with the bulk of those losses coming in the wake of the invasion.
And Ukraine’s currency, the hryvnia (pronounced “hu-RIV-nee-a”), is down about 11% versus the dollar over the same time.
Even if Russians and Ukrainians want to spend their devalued currencies, they can’t be sure they’ll be able to get them out of the bank.
They don’t have to worry about that with bitcoin and gold. Plus, both are inflation-proof. That’s because they’re limited in supply. (There can be only 21 million bitcoins ever.) And they’re expensive to produce more of.
It’s something the newest expert on the Legacy Research team, Nomi Prins, has been putting on her readers’ radars.
She’s a former Wall Street insider turned whistleblower. After 9/11, she quit a seven-figure job at Goldman Sachs (GS) to expose how Wall Street tilts the playing field in its favor… and tries to shortchange regular investors.
And she’s a big fan of assets outside of the traditional finance system.
As she wrote last week at her daily e-letter, Inside Wall Street With Nomi Prins…
It’s always a good idea to have assets in your portfolio that are scarce and hard to produce. Especially when the value of the fiat money in your wallet is falling by the day…
Holding gold and bitcoin in your long-term investment portfolio is pragmatic. They’re crucial to protecting the value of your hard-earned money over time.
But one of Nomi’s readers isn’t so sure about putting bitcoin in the same category as gold…
Reader question: I spend my winters on an island in the Caribbean where I know not a single soul could explain what bitcoin is.
If I told them there are more than 1,000 digital tokens that people can have on their cell phones, I am sure their eyes would glaze over.
That central banks and the International Monetary Fund (IMF) are working on creating their own versions of blockchain currencies should signal to any investor that cryptos are a gamble. Perhaps they’re useful as a bet.
But if you say one of the 1,000 will be the be-all and end-all, replacing gold or silver as monetary wealth, I think you are sadly mistaken.
– Eric E.
Nomi’s response: Hi, Eric. Thank you for your observations.
It’s true. The evolution and trajectory of bitcoin has less to do with economies than with math, technology, and timing.
When the global financial crisis erupted in 2008, central banks went into money-fabrication mode.
The computer science that led to the development of bitcoin had been around for decades. But the official launch of bitcoin in 2008 was due to the financial crisis.
About 14 years have passed since then. And even if most people can’t explain how bitcoin works, they know it exists. Many of them use it and invest in it.
The debate between gold and bitcoin isn’t going away anytime soon. Time will be the ultimate judge.
But consider how far gold has come and how solidly it has performed throughout its long existence. Then look at how quickly bitcoin has transformed the financial and the monetary systems in its much shorter existence.
Here’s why I recommend holding both. They share one critical theme: They’re sound alternatives to the fiat currency system.
But holding on to bitcoin for the long run raises a critical question in one reader’s mind… What happens to your bitcoin after you die?
On standby for a response is Teeka’s analyst Grant Wasylik.
Grant recently interviewed a top estate-planning attorney about crypto assets. He also spoke with one of the top financial advisors specializing in crypto. So he’s the perfect person to weigh in on this…
Reader question: A couple of years ago, the big problem was that when somebody dies, his bitcoin wealth disappears unless he’s so trusting he has given all his relatives the key to retrieve the bitcoins. Is that still the case?
– Ian M.
Grant’s response: Thanks for your message, Ian.
When someone passes away, there’s a process of discovering what they own.
In the past, you might’ve looked through their mail for bank and brokerage statements. But since we usually hold crypto in private wallets, there’s no paper trail for them.
This raises three important questions:
How do you discover the assets? Crypto is digital. And online assets are particularly difficult to discover. If you don’t have the password to a computer, you can’t discover what’s online, in a file, or elsewhere on that device.
Who owns the assets? Is it an individual, a trust, or something else? Many people will use a trust to avoid probate (the often lengthy process of proving a will is valid).
Who has access? You need the legal authority to start handling someone else’s assets after their death.
If an heir can’t answer these questions, they’re out of luck. They can’t access the deceased’s crypto.
That’s why you need a plan before you die.
So here’s a general guide to help ensure the discovery, ownership, and access process goes smoothly:
Have a will. Clearly stating how to distribute your assets and property is the easiest way to ensure nothing gets lost.
Consider a trust or LLC. This can protect your crypto assets from estate taxes and other financial liabilities, leaving more to your heirs. If you have cold wallets (offline crypto wallets) you don’t list in your will, trust, or LLC (limited liability company), have a document with instructions on finding and accessing them.
Choose executors or trustees who understand crypto. Since holding crypto is different from holding cash, choose someone who understands how to trade and hold it. This may require having a separate crypto executor or crypto trustee.
Record and secure your crypto wallet details. Although it’s often best to avoid writing down seed phrases and passwords, consider having physical copies of your credentials. You can hold the paper copy in a secure file cabinet, a safety deposit box, or some other offline location.
Understand the limits on your crypto accounts. For instance, most crypto custodians allow only individual accounts without TOD (transfer on death). But as the crypto market grows, more options will become available.
Keep your estate plan up to date. You need to account for any major life changes including weddings, divorces, births, adoptions, new accounts, new passwords, etc. Staying on top of these things will lessen the burden on your loved ones.
This guide is just a starting point. But these six steps should get you thinking about how to ensure your crypto gets in the hands of your intended heirs.
That’s all for this week’s mailbag.
Remember, if you have a question for anyone on the Legacy team, be sure to send it to [email protected].
Have a great weekend.
Regards,
 |
Chris Lowe
March 4, 2022