Crypto Investing: Bitcoin, Ether Strategy; Altcoins to Avoid: Gerber Kawasaki
- Ross Gerber runs the wealth management firm Gerber Kawasaki.
- He told Insider he is bullish on both bitcoin and ether and invests equally in the two coins.
- Gerber also said explained why he doesn’t buy altcoins right now.
- See more stories on Insider’s business page.
It didn’t take long for Ross Gerber to become a cryptocurrency convert.
“I was a bitcoin-hater in 2014, but I’d been talked around by 2015,” the wealth management chief executive told Insider in a recent interview. “Some of my crazier friends were trying to persuade me to put $100,000 in, and they’re now fabulously wealthy.”
Since 2010, Gerber has headed up Gerber Kawasaki, an investment firm and ETF provider with $2 billion under management and offices in Santa Monica, CA, and San Francisco, CA. The firm advises around 7,000 families, concentrating on transformative investment themes including digital payments and sports betting and specialising in advising retail investors.
Unlike several other high-profile investors, including Ark Invest’s star stock-picker Cathie Wood, Gerber doesn’t commit to bitcoin price predictions.
“I don’t like making price predictions, because bitcoin is a supply and demand kind of thing,” he said. “Its price is 100% related to its adoption – the more people use it, the more valuable it gets.”
“The basic bitcoin strategy we recommend to our clients is that you buy it, and you hold it for the long term,” he added. “We’re not traders.”
Instead, Gerber spoke to Insider why he recommends a 50/50 portfolio split between bitcoin and ether, and explained why he recommends that retail investors looking to generate wealth should avoid altcoins.
Bitcoin and ether weightings
Gerber is bullish about both bitcoin and ether, the two largest cryptocurrencies by market capitalization. He told Insider he allocates $5 million of Gerber Kawasaki’s $2 billion assets under management into bitcoin.
“From an investment perspective, I see bitcoin as one of the best opportunities in the world,” Gerber said. “In 10 years, a lot more people will be using bitcoin, and it will be so much more valuable.”
Gerber pointed to El Salvador’s adoption of bitcoin as an official currency as a model for how the cryptocurrency can play a larger role in the global financial system.
“Now bitcoin is a currency in El Salvador, it could spread across the developing world,” he said. “I have friends in Nigeria, and if they make some money, they want to buy bitcoin, which they can trade freely, anywhere in the world, and through their phone.”
Gerber said that one downside of bitcoin is its lack of technical applications when compared to other layer-one blockchains, such as the ethereum network, but it will always retain a first-mover advantage as the best-known cryptocurrency.
“Bitcoin, to me, is like ‘digital gold’,” he said, referring to the idea that bitcoin will function best as a store of value. “It’s not the most practical solution for transactions.”
“Ether can support smart contracts, what you can build on it is now scalable, it has unlimited application use,” he added. “I’m much more bullish on ether in that sense – its application use and utility is better than bitcoin.”
Gerber said one key aspect of ether’s appeal is its upcoming transaction from a proof-of-work to a proof-of-stake algorithm. This aims to make the ethereum network more efficient and secure.
“Ether right now is all about changing from proof of work to proof of stake,” he told Insider. “Ether transactions happen almost instantly, whereas bitcoin can be so slow.”
Don’t buy altcoins
Altcoins like cardano and solana have surged this year, with some investors buying “ethereum killers” due to their cheaper transaction fees. An altcoin is a cryptocurrency that isn’t bitcoin or ether.
However, Gerber tends to stay away from these sorts of assets.
“I do follow these coins, but I’m an old bitcoin guy,” he told Insider. “Most of these coins will eventually fail.”
Gerber Kawasaki offers two financial planning programs: wealth building and wealth management. Both concentrate on steady income growth, making altcoins’ extreme volatility much less attractive.
“I’m a big believer that an investment has to serve a utility that produces income,” Gerber said. “For all the individual coins, it’s just 100% speculation.”
Gerber said he therefore recommends retail investors give equal weight to bitcoin and ether in their portfolios, while limiting their exposure to any other cryptocurrencies.
“We split our investments 50/50 between bitcoin and ether for our clients,” he told Insider. “Right now, when it comes to cryptocurrencies, we don’t recommend anything else.”
