FTX's collapse has crypto investors everywhere rethinking how they hold their coins, and CNBC turned to financial advisors, including our Managing Principal, Daren Blonski, for the article "Three Things Crypto Investors Need to Know in a Post-FTX World, According to Financial Advisors". Daren's core message is one he's been repeating to clients for a while: the technology and the exchanges built on top of it are not the same thing. "Investors need to differentiate between blockchain technology and exchanges," he says. "Those two get melded into each other and that creates a lot of the issues." "We've been pounding the table saying this to clients," he adds. On keeping crypto secure, Daren is direct about the tradeoff between convenience and risk: "I have money on exchanges, but I know that that money is always at risk. It's a choice because it's just more convenient on some levels, but I sure as heck don't keep my Bitcoin on exchanges." Sonoma Wealth Advisors also draws a hard line on derivatives, refusing to use them, and Daren says the firm hopes regulators will conduct a "legitimate review" and approve a spot Bitcoin ETF. "Other than that: not your keys, not your Bitcoin is our professional opinion," he says. Asked about the state of the market after FTX's implosion, Daren doesn't sugarcoat it: "The market is not mature enough, we don't have the transparency and clarity, and the SBF incident just proved that to us."
Key Takeaways
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Blockchain technology and cryptocurrency exchanges are not the same thing, and confusing the two is a major source of investor risk.
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Keeping Bitcoin on an exchange is a convenience, not a safety measure, since that money is always at risk while it sits there.
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Sonoma Wealth Advisors will not use crypto derivatives, and is hoping regulators move toward a real spot Bitcoin ETF.
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The FTX collapse underscores that the crypto market still lacks the transparency and clarity of more established asset classes.
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Our professional opinion echoes the crypto community's own mantra: not your keys, not your Bitcoin.
Working through how much crypto exposure makes sense, and how to hold it safely, is exactly the kind of conversation we have with clients. Learn more about our Investment Management services.