Ross Gerber: “The Biggest Mistake I Ever Made Was Spending My Bitcoin”
The price of Bitcoin has been turbulent as ever over the past couple of months. New investors have rushed to claim a stake in the riches as early adopters have sold piles of cryptocurrency for millions more than they paid. All the while, phones have been ringing off the hook at investment firms, where potential new clients want to know what the heck to do with their new wealth.
We asked Ross Gerber, CEO of Gerber Kawasaki, an investment advisor with USD 650 million in assets under management, for his take on the “bubble” so many others have forecast. Gerber is a frequent guest on CNN, Bloomberg TV, CNBC, Fox Business News, and Reuters, as well as a contributing writer for Forbes.com. Now he’s sharing his insights with Cryptonews.com.
What do you think about the "cryptocurrency bubble" idea? Should investors be worried? What could force this bubble to burst?
I work in the stock market, so we hear pretty commonly, “Don’t you think this is a bubble in stocks, bonds, real estate?” “Don’t you think there’s a bubble in crypto,” is another one of these “don’t you think there’s a bubble?” questions. I don’t look at it that way, bubble or no bubble. I look at it like this: You have a dollar. Where should you put it?
The banks have not paid interest to people for a decade. Investing is really attractive when you earn nothing on your cash. When the government is printing money, you actually lose money.
One can worry about bubbles all around, but the truth of the matter is, where are you going to put your money? The banking system is garbage. People have created an alternative banking system as a reaction to that reality. There are millions of Americans investing in cryptocurrencies. I can’t tell you what something’s worth. Bubbles will burst when banks start paying more interest and people pull their money out.
How can you plan long-term investments in cryptocurrency?
You have to look at it in the context of where you’re at financially. If you have a lot of money and you want to put some money in these things, that’s good. But if you’re 25 and you only have USD 5,000, you’re gambling—it’s a horrible idea. I would say sports betting is wiser than to just start betting on cryptocurrencies. That’s what it is, is betting. If you’re a young person, open an IRA and invest in the stock market. That’s the new joke here—“Why don’t you buy something safe, like stocks?”
How did you start investing in cryptocurrency?
When I started, crypto was really boom and bust. Some of my friends are the innovators who created Bitcoin. They sat me down three or four years ago and explained it all to me. All those guys right now are some of the richest people in America. It’s kind of crazy. I actually bought Bitcoin three years ago, so I did make a lot of money from it, and I’ve sold a lot of it because I’m no dummy. What I have in Bitcoin these days is all profit because I bought bitcoin at USD 400.
What do you think the future of cryptocurrency looks like?
I think bitcoin is the beginning of something that is much bigger. I do think a new way of spending money is being created and could actually be a better system. Bitcoin exchanges are so sophisticated already. These guys are really building some good stuff.
We’re investors right now in Paypal, and they could start accepting cryptocurrencies. If they do, this could change the world—people wouldn’t need credit cards, which take 3% on transactions. If everyone starts accepting it, it could make the cost of goods do down. Right now, what the millennials are using is Venmo (a mobile payment service owned by PayPal), because it doesn’t charge fees. Cryptocurrency is the same idea—how do we move money without fees? Mostly, consumers will win. Banks will lose.
The people involved with crypto are very smart. They’re some of the best developers in the world. They’ve created a decentralized monetary system that’s working, for the most part. As this expands, as people buy into global currency that’s digital and decentralized and used all over the world, that will cut out the banks as middlemen. Banks cost consumers billions and billions of dollars a year.
The entire traditional banking and brokerage system in America could be wiped out in the next 20 years. If they don’t get on the ball here, these guys in crypto are going to take all of their business. There will be no reason to have a checking account, no reason to have money in a bank at all.
How are they going to stay in business when they rip off everyone constantly?
So do you ever spend your cryptocurrency?
The biggest mistake I ever made was spending my Bitcoin. I bought a computer for one Bitcoin. It’s a Dell, and doing that cost me USD 15,000.
But as everybody goes to digital payment systems, it will make Bitcoin easier to use. There are a lot of people who are looking to take Bitcoin in their business. We’re looking right now to see if investors can pay us their advisory fees in Bitcoin. That’s the next step.
Is it possible to invest safely in cryptocurrency?
I look at my overall net worth in different buckets—high risk, safe, stocks, bonds. Crypto was like the speculative alternative investment, which for most people is about 5 to 10% of their net worth.
Crypto has a place as maybe 1 to 5% of your portfolio. If you look at it that way, you don’t have to worry about the risk. But if you’re like some of the people we know who have USD 83,000 in crypto and otherwise have a net worth of USD 10,000—dude, sell half of your money right now. I’ve watched large financial institutions bottom out at USD 0. That could happen.
I would very much caution you against buying bitcoin. Bitcoin Cash works. If you try to send a Bitcoin right now, it doesn’t work. It’s not really a workable solutions for transactions at this point. I would argue you’re better off in Bitcoin Cash or Ethereum. If you can’t really use it, it doesn’t have value other than that people will hold it. You want to be able to use your currency. Bitcoin cash works better, and is essentially the same thing.
But if you don’t know what you’re talking about, if you don’t understand Bitcoin, you shouldn’t be investing in it.
Do you think Bitcoin has reached its limit?
I do think bitcoin might have already topped. I could be 100% wrong and this could just be the beginning. It’s so hard to tell. It just takes one exchange going down or one big hack and this whole thing could fall apart.
I think there’s enormous upsides in other digital currencies, like Ethereum and Bitcoin Cash, which work better for their purposes. But if the original guys who invented all this stuff are selling their Bitcoin, I think you should watch them closely. I’ve sold most of my bitcoin and am now holding about a half a Bitcoin. I’ve been able to triple my money on other coins I’ve bought. That’s where I think there are opportunities.
Are a lot of people asking you for advice on this?
Our phones are almost off the hook, it’s kind of crazy. It’s all young people. My mom is like, “Why don’t I do this?” and I’m like, “Are you serious?”
You’ve got to be very careful. If everybody’s talking about something, it’s definitely too late.
We’re not allowed to advise people what to do with cryptocurrency at this point—it’s murky. But we’re getting a lot of calls from people who’ve made a lot of money in crypto and want to know what to do with it. They’ve sold their crypto gains and are investing in safer things now.