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Keeping Up With Digital Assets

Keeping Up with Digital Assets: Cryptocurrency Prices’ Impact on Estate Planning

Cryptocurrency prices tanked this month and this time it’s not just fringe investors that lost out big. On Monday, May 9, 2022, Bitcoin plunged to its lowest level since 2020 and has now lost more than 50% of its value since peaking in November. When the same happened in 2018, less than 8% of US adults owned any kind of cryptocurrency; now, more than 16% report having bought in. The event has been labeled a “perfect storm” by Dan Dolev, an analyst for the Mizuho Group who covers crypto companies and financial technology. A lot of people have lost a lot of money which is leading individuals to reassess not only their investment strategy but their estate planning, as well.

What Is Cryptocurrency? A Quick Recap…
Cryptocurrencies are complex and so while most people have heard of them, few know what they actually are. We’ve written on this before but a quick recap never hurts.

What is cryptocurrency? Well, in simple terms, it is a financial instrument that allows people to exchange money without using a traditional financial institution as a mediator. This is achieved by what is called “blockchain technology.” The fancy feature is that this technology produces unique pieces of code that cannot be replicated or changed and are distributed through an encrypted digital network. These bits of code are described as coins and their appeal is that they can be traded privately and without the regulatory oversight imposed.

While traditional finance links any transaction to your identity (social security number, name, address, etc.) the decentralized finance supported by cryptocurrencies is pseudonymous. No one asks for your social security number when opening a crypto wallet and you hold your money, yourself.

The potential of this technology is both dazzling and scary, but it only attains value if people buy in.

Cryptocurrency prices are established the same way the price of anything is established: through supply and demand. Right now, with inflation high, stock markets shaky, and supply chain problems continuing to bog down the global economy, investors are shying away from risky assets and so demand is down.

Cryptocurrency prices are not the only asset class to take a hit. Tech stocks have also plummeted and the S&P 500 nearly hit bear market territory this week. Nonetheless, digital assets have been hit especially hard and when (or whether) they will recover is hard to predict.

Estate Planning and Cryptocurrency 
There are two sides to this coin. First, the relationship between cryptocurrency and retirement planning, and second, how to account for crypto assets in your estate plan.

Naturally, there is no one-size-fits-all answer to whether crypto should play a part in your retirement plan. Too many factors intervene, including age, financial position and goals, present assets, etc. Your best resource is to speak to an experienced retirement planning professional who can address your specific case.

Where accounting for crypto assets in your estate plan is concerned, the advice is similar: seek counsel from an experienced estate planning attorney. The reason here is that legislation concerning the management of digital assets as a part of a person’s estate is an evolving subject. Laws are playing catch-up and so what may be true today could be different tomorrow.

To learn more about protecting your assets, digital or otherwise in this present, unstable moment, do not hesitate to contact  The Law Firm of Christopher W. Dumm either by calling 417-623-2062 or using the contact form on our website.


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