Don't let optimism about crypto trump rational thinking,

Learning how to discuss cryptocurrency with clients is one thing, but figuring out how to do so in a way that is sensible is another.

Because cryptocurrency prices are ubiquitous and simple to understand, journalists and investors frequently focus on them. The fact that Bitcoin (BTC) and other cryptocurrencies (altcoins) have lost 60% or more of their value this year is something we cannot ignore.

According to Pocket Network CEO Michael O'Rourke, "We're obviously in a down cycle." Worldwide infrastructure for blockchain developers and end users is coordinated by the Pocket protocol. Even amid a downturn, he remains upbeat: "Given how many developers are genuinely coming in, I've never seen more prospects and greater opportunity for growth."

O'Rourke can provide a positive image of the future of cryptocurrency and decentralized finance projects because of his position at Pocket, which gives him the opportunity to follow new developers and players in blockchain ecosystems directly.

"There are more people participating. There are more blockchains being introduced, he claimed. The best part is that markets like these attract individuals who build things the right manner and for the right reasons. "If anything, the actual growth of crypto and blockchain has actually accelerated."

O'Rourke is tremendously upbeat about the future of blockchain technology as a significant human coordinating tool at the level of business, religion, and government.

However, that message conflicts with what investors—and your clients—are actually witnessing: the failure of some projects, the insolvency of some exchanges, and declining portfolio values.

What should consultants do?

Take extra precautions

According to Brad Roth, chief investment officer at digital turnkey asset manager Thor Financial Technologies, the first step is to assist the client in protecting their assets.

The first step, according to Roth, is for advisors to educate themselves and work with the appropriate partners to assist clients in securing their cryptocurrency holdings. "Ideally, that means off of exchanges and into cold storage," the trader says. "What makes me most anxious is clients trying to day trade cryptocurrency on arbitrary exchanges."

On digital exchanges, which lack liability protection, assets are exposed. However, cold storage necessitates that investors remove funds from their hot wallets and fully offline. There, they are safe from theft and loss.

Cold storage, however, also means that clients own the digital keys to their own cryptographically secure data; as a result, advisors should recommend alternate methods if an elderly client has trouble remembering things like passwords or physical keys.

The good news is that there are still a lot of advantages to owning cryptocurrency that investors may take advantage of that don't need to keep their money in cold storage.

Clients can also choose to have their cryptocurrency assets protected and kept in cold storage of institutional caliber.

Advisors may consider securing institutionalized custody for their clients, according to Roth. We have custody agreements with Eaglebrook and other parties, says Thor. When compared to relying on a website and crossing your fingers that you can access your cryptocurrency when you need to make a withdrawal, they really provide safer access to cryptocurrency.

Certain private placement instruments, such as the Grayscale Bitcoin Trust (GBTC), which is publicly traded on the OTCQX, an over-the-counter exchange, provide advisors with additional alternatives. (Digital Currency Group, which also owns CoinDesk, is the owner of Grayscale.)

Customers can purchase and keep GBTC, a bitcoin investment instrument, in their standard brokerage accounts. Although it prevents them from directly owning bitcoin, it replicates its performance and enables them to achieve comparable financial gains.

Promote investment rather than trade

One disadvantage of letting clients invest in cryptocurrencies is the propensity to view the asset class as a high-growth speculative investment, as did early investors.

People need to "truly think through this asset class," according to CK Zheng, co-founder of cryptocurrency hedge fund ZX Squared. "They need a long-term plan if, like me, they think this asset class is investable over the long term. They are unable to day trade or focus only on the upcoming year or the upcoming three months.

According to Zheng, it might be challenging to locate locations to securely keep cryptocurrency and preserve custody when you frequently trade it. Additionally, it makes it more likely that the investor will lock in losses. Instead, advisors should encourage customers to invest in cryptocurrency for the long term, or to "HODL."

According to Roth, advisors must do more to encourage clients to express their frustrations with their cryptocurrency holdings: "Advisors also need to talk to clients. Investors are quite sensitive. Investors who want to prosper in a volatile asset class like bitcoin or Ethereum must be able to control their emotions.

Recommend a good strategy

Roth and Zheng acknowledge that not all investors who are interested in cryptocurrencies will necessarily use their investing tools.

Instead, the majority of investors will choose a self-directed investing strategy that enables them to independently purchase and retain crypto assets.

The fact that digital assets were inventions developed by engineers rather than huge financial institutions is also one of their strongest charms.

According to Roth, having a straightforward, repeatable procedure for investing in cryptocurrency can aid in managing emotions and preventing bad choices.

I believe that individuals need a method for investing in cryptocurrencies, he stated. "It can be as easy as purchasing and holding and dollar cost averaging. Whatever it is, it will assist in removing emotion from buying these.

List the causes for your optimism

Blockchain and cryptocurrency are popular among futurists, and supporters enjoy spreading the word about how these technologies will continue to be integrated into more aspects of life, culture, and society. However, advisors will need to give more conventional, factual responses when speaking to investors who are skeptical.

However, there are three such reasons that advisors may be upbeat about the future of cryptocurrency.

First, blockchain technology will likely be used in the majority of financial transactions as part of a long-term digitalization trend. Eventually, tokenization might apply to nearly every financial asset. This ought to assist boost cryptocurrency's value over the long term.

Second, regulation may aid rather than impede the future of cryptocurrency. We don't currently have many regulations in place, said Zheng. People can't really see where we can go in terms of regulation since we're not even close to being finished. The numerous problems in the industry have been made evident by this bear market, which will undoubtedly influence future regulation. The industry will benefit from more regulatory certainty.

Third, despite the fact that many people you know have already heard of cryptocurrency and blockchain technology, adoption is still in its very early phases.

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