Guided Investor

Crypto – the good, the bad, the ugly. A Financial Adviser’s perspective.

I have been putting off the crypto topic for some time now because it’s still relatively new and has the power to divide people more than pineapple on pizza. But crypto has now grown its total market cap to over USD$2 trillion making it hard to ignore any longer.

Crypto investments are becoming increasingly accessible to the retail investor. Commonwealth Bank, Australia’s largest Bank, will give customers access to crypto via their platform. REST Super has said they want to allow members to invest their super in crypto, and there are emergences of ETFs which give you exposure to crypto or at least crypto related businesses.

So today I thought I would share with you the good, the bad and the ugly of crypto. Let me preface this by saying I am not a crypto expert. I know the basics of crypto, but I would be lying if I said I understand exactly how blockchain technology works. I am coming at you today from the perspective of crypto as an investment. 

Also, I have entitled this “A Financial Adviser’s perspective” but really, this is just my perspective and doesn’t necessarily represent advisers as a whole. I am sure each adviser would have their own take on whether crypto is a viable investment or not.


There are many good and exciting aspects of cryptocurrencies which have the potential for real life application. Firstly, let’s look at the benefits of blockchain technology.

A blockchain is basically a digital ledger that records information across an entire network of computer systems. This makes it difficult, or even impossible to change, hack or cheat the system as the information is duplicated in many different locations.

This decentralised structure can have many benefits including improved security and privacy, reduced costs and faster transaction speed. Unfortunately, some of these benefits have meant that crypto has been used for money laundering and illicit activity but misuse of a technology does not necessarily deem it bad.

There are also new technologies being created as we speak that could be game changing for the way we live our lives, run businesses and interact with people. This includes Non-fungible tokens (NFTs), the Web 3.0 and, my personal favourite, the metaverse.  Mark Zuckerberg believes in this concept so much that he changed the name of his $941 billion dollar company from Facebook to Meta.

Crypto currencies have the potential to play a big role in these new technologies that could shape the future as you need crypto to buy items and participate in this new digital world. This is why Ethereum is one of the more popular cryptos available as it’s blockchain creates smart contracts which prove ownership of digital assets such as NFTs.  

One popular aspect of crypto, in particular Bitcoin, that attracts many investors is its finite number. The supply of Bitcoin has been limited to 21 million coins. This is very important from an investment perspective because the two key factors which make something valuable are scarcity and usefulness.

We have already seen that crypto currencies can be useful, but scarcity is arguably more important. If something can be continually bought into existence, it will never hold much value as the supply side of the equation will keep prices low. However, if you have limited supply and strong demand, the price will rise.

Going back to our Bitcoin example, if supply is limited, and demand for Bitcoin remains strong, then it will hold its value and may even increase in price depending on how far demand is pushed. Some investors see this as a benefit over fiat currencies as central banks can create new money, which arguably dilutes the value of the currency through inflation – a very hot topic in today’s markets.

Recently, there has been an unprecedented use of stimulus to boost the economy. At the start of the COVID-19 crisis, governments around the world delivered a combined $10 trillion of stimulus in the first two months alone, which is three times higher than that of the global financial crisis.

All of this money creation has led some investors to worry about the stability of fiat currency, particularly the US dollar (USD). Not only has the US implemented the largest amount of stimulus, but it is the world’s reserve currency meaning it’s the most widely held and used currency in the world.

This had led a number of people to place their trust in crypto currencies like Bitcoin which have a limited supply and is decentralised from any government creation. In this instance, crypto is acting as a store of wealth and can be likened to the modern version of gold.  


Now that we have looked at some of the good, let’s consider the risks of crypto investing.

While crypto may become your ticket to living in the digital world, I personally don’t believe it will ever become a mainstream form of currency in the real world. Why? Because governments will never relinquish control.

The ability for governments to control their currency is the key to controlling the economy and, to an extent, the people in it. Currencies are used for monetary and fiscal policy and also used as a way to disincentivize people from doing the wrong thing, i.e. you speed, you get a fine.  

Governments will never give up this power and for good reason. Look what happened to Greece when they gave up the drachma in 2002, replacing it with the euro. They defaulted on their debts in 2015 as they weren’t able to print their way out of the problem. Obviously, this is a very simplistic view of the Greece situation, but it does outline the risks of giving up control.

Now I can hear some of your saying “it doesn’t matter what the governments want because crypto is decentralised and it’s up to the people if they want to utilise this technology or not”. This is true to an extent but unfortunately if you want to live in a country, you have to play by their rules. Taxation and legislation make sure of this.

If you live and work in Australia, you have to pay tax in Australian dollars which means you get paid in Australian dollars and all your purchases are made in Australian dollars. Governments are very unlikely to change this system.

Yes, El Salvador was the first country to recognize bitcoin as a legal tender but this is not a good example of countries adopting crypto because El Salvador didn’t have their own currency in the first place. They have used USD since 2001 after their own currency, the colón, historically failed to deliver.

I think you will find that as time passes, and if the crypto market continues to grow, there will be more legislation enforced surrounding cryptocurrencies. Tony Richards, the head of payments at the RBA, recently came out warning investors of the risks of crypto and indicated there could be scope for a central bank digital currency (CBDC).

The other major downside with investing in crypto is the volatility. There is no denying that early adopters of the more mainstream crypto currencies like Bitcoin and Ethereum have made good money. But it has been a scary ride.

In the last year alone, Bitcoin has had a high of USD $68,991 and a low of $28,801. That is a 140% swing in the space of 12 months and Bitcoin is one of the more “stable” cryptos out there! It baffles me that all it takes for some of these massive swings is a tweet from Elon Musk.  

Sure, there is also volatility when investing in the stock market and any other growth asset for that matter. Personally, the volatility in stocks doesn’t bother me because I have faith that provided you buy good, profitable businesses, it will recover.

For instance, if I bought an ASX 200 ETF, the only way I could lose all my money is if all the top 200 companies in the Australia went bust. This means retail stores would collapse, banks would fail, the government would crumble, currency would be worthless and at that point, my stock portfolio would be the least of my worries.

With crypto on the other hand, if all the coins disappeared tomorrow, the real-world repercussions of that event would be minor. Some people would lose money, but we would all go on living our lives relatively unchanged.

Finally, I can’t end talking about the bad side of crypto without mentioning the power consumption. Not all cryptos consume a lot of power, but Bitcoin consumes more electricity every year than Finland, which is a country of 5.5 million people. In a country where we are trying to have net zero carbon emissions by 2050, that’s not a great statistic.


Finally, I just want to touch on the ugly side of crypto and this is not really crypto itself, but the way some people are using crypto to scam money out of others.

You may have heard of pump-and-dump schemes. This is where someone buys an asset (in this case, a particular type of crypto coin), promotes it publicly to get other people to buy in and push up the price, then sell out. If you want an example of pump-and-dump, have a look at the token called SaveTheChildren.

A more famous misuse of crypto was done with the Squid Game token. This token rose 75,000% in less than a week thanks to the massively popular Netflix series. But the price quickly plummeted when investors started to suspect it was a scam, causing the creators to do a “rug pull”, abandoning the project and selling out to real-world cash. The result, the token went from USD$2,860 to virtually nothing in a matter of minutes.

The moral of the story, be very careful where you get your information and don’t invest with FOMO!

Does Crypto belong in your portfolio?

Now that we have looked at the pros and cons of crypto, it’s time to ask the hard question – should you be investing in it?

From the perspective of a Financial Adviser, it’s not something that we include in client portfolios at this stage simply because the risk is too high. I would rather miss out on potentially a great investment opportunity in order to preserve capital if it were to turn sour.

We do have exposure to companies that are leveraged to digital assets (like Meta) and sometimes as an investor its better to invest indirectly in these areas through a pick-and-shovel play.

However, having said that, if you believe in crypto and you have done your research then I don’t have a problem with investing in it. It has a high risk-return trade-off and if that suits your appetite, then go for it!

I have many clients who have some exposure to crypto and they choose to include it as part of their overall portfolio. I simply advise these people not to put all their assets into crypto, keep the holding relatively modest, and use it as a way to diversify from more traditional assets like stocks and property.   

Personally, I don’t have any crypto holdings. There was a stage where bitcoin kept trading between USD$30k and $40k and I traded the short-term volatility to make a quick buck. But I don’t have enough conviction at the moment to include any particular coin as part of my long-term asset allocation and that may mean I miss out on a huge opportunity. But I am okay with missing out.

I think Bill Gates summed up crypto investing nicely when he said “my general thought would be that if you have less money than Elon Musk, you should probably watch out.”


The information in this website is for general information only.

It should not be taken as constituting professional advice from the website owner – Guided Investor as Authorised Representative of Symmetry Group (AFSL 426385)

You should consider seeking independent legal, financial, taxation or other advice to check how the information relates to your unique circumstances.

Guided Investor is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information provided directly or indirectly, by use of this document.

Related Articles

Superannuation Hacks: Unlocking the Potential of Your Retirement Savings

Today we explore three incredible superannuation hacks that will revolutionise your financial plan. These hacks are often overlooked, but once you discover them, you’ll be able to supercharge your superannuation and maximize its benefits. Get ready to unleash the true potential of your retirement savings! Hack 1: Superannuation as a Structure First things first, let’s

Read More
Family trust

Family trusts for wealth creation

A family trust can be a great vehicle to help build wealth, with many benefits from a tax, asset protection and estate planning perspective. I personally use a family trust in my own situation and have many clients that do so as well. This puts me in a good position to give you some high-level

Read More

Does money buy happiness?

Saying that money buys happiness, sounds a bit….avaricious. But according to the research, money does in deed help us to be more happy. So let’s take a look at the data to determine, once and for all, does money buy happiness? Study 1: Happiness improves with income up to $75,000 The first study published by

Read More
Brad Buters Financial Planner Perth

Brad Buters

Financial Adviser

Helping you do MORE with your MONEY through practical (no BS!) advice.

My personal favourites
Tailored Advice

Let us help you create a tailored financial plan