Will China’s Crackdown on Cryptocurrency Affect World Markets?

Tom Vaughan is a Certified Portfolio Manager and CEO of Retirement Capital Strategies. Retirement Capital Strategies is a registered investment advisor located in San Jose, California.

The opinions voiced in these presentations are for general information only and are not intended to provide specific advice or recommendations for any individual(s). The information provided herein is obtained from sources believed to be reliable, but no reservation or warranty is made as to its accuracy or completeness. Statements and opinions are subject to change without notice. Asset allocation and portfolio diversification cannot assure or guarantee better performance and cannot eliminate the risk of investment losses. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. Accordingly, you should not rely solely on the information contained in these materials in making any investment decision as the material does not take into account your particular investment objectives, financial situation or needs and is not intended as recommendations appropriate for you. You must make an independent decision regarding investments or strategies mentioned in this presentation. Before acting on information discussed in this presentation, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial or investment advisor. Prospectuses, investment objectives, risks, charges and expenses of any investment product should be reviewed carefully before investing. This platform is solely for informational purposes. Advisory services are only offered to clients or prospective clients where Retirement Capital Strategies and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Tom Vaughan or Retirement Capital Strategies unless a client service agreement is in place. “Likes” are not intended to be endorsements of our firm, our advisors or our services. Please be aware that while we monitor comments and “likes” left on this page, we do not endorse or necessarily share the same opinions expressed by site users. While we appreciate your comments and feedback please be aware that any form of testimony from current or past clients about their experience with our firm is strictly forbidden under current securities laws. Please honor our request to limit your posts to industry-related educational information, comments and questions. Third-party rankings and recognitions are no guarantee of future investment success and do not ensure that a client or prospective client will experience a higher level of performance or results. These ratings should not be construed as an endorsement of the advisor by any client nor are they representative of any one client’s evaluation. Investment positions mentioned in these videos may be held in some of our existing portfolios. Tom Vaughan and Retirement Capital Strategies are unaffiliated and separate from those companies whose investment positions are mentioned and is not liable for their products or services.

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Transcript:

Easan Arulanantham:

The first question is about some news that came out of China this morning, how they’re essentially cracking down on cryptocurrencies and then are looking to outlaw their transactions. “So, do you think if cryptocurrencies fail, will there be a ripple effects throughout the rest of the markets?”


Tom Vaughan:

Yeah, you know what? Actually, a couple things. First of all, I do think it’s a fairly big deal, when the second biggest economy in the world is not allowing people to use cryptocurrencies for transactions. It’s one of the biggest problems with cryptocurrencies long term is just what they call “The Use Case”: What are you going to use it for? So, you have this Bitcoin, and how do you use it? Can you buy things with it? … But it’s interesting that it’s only down about 5% today. You would expect, possibly that it could be down more, because of what China has done. And I guess if I was a Cryptocurrency investor, I’d be wondering, “Okay, China’s going to do this. Does the US do it? Do other countries do it also?” And that could be a really detrimental aspect to Cryptocurrency itself. How that impacts the stock market is really kind of interesting. A couple of things: If somebody has to sell their stock holdings, to cover some losses on cryptocurrency, that’s how we get that contagion. So for example, …2008, when Lehman Brothers failed, there were all of these mortgage bonds that were sitting out, there that started to implode in that same timeframe, and people would put insurance policies on top of those mortgage bonds, and they had to pay off. And so these are huge institutions.

There was $7 trillion worth of these what they called Credit Default Swaps out there. So they had to sell Cisco and IBM and such to pay off these Credit Default Swaps. And so that’s where you can get this connection, even though he didn’t have bonds in your portfolio, “subprime loans” they were called at the time. You might still ended up with some paying, because people had to sell that. We have not seen that with this cryptocurrency so far. And I believe partly is because there isn’t tremendous amount of institutional buying insider cryptocurrency; it’s a lot of individuals. Although they might use leverage, they’re not going to maybe have as big an impact on having to sell off for the stock market. I would suspect actually, it could be positive, because one of the things that has happened, is those individual investors last year were mostly buying Technology, Genomics, Clean Energy, right? All of these things. And then this year, they moved a big chunk of their money off into the cryptocurrency arena. And so if that cryptocurrency starts to really falter, maybe some of that money comes back into the stock market. So, I think it has a potential, at least in this environment, to be positive. And you know, we’re seeing a decent market today. I’m looking at this: The S&P 500 is up .06%, even though China has done what they did. So it hasn’t translated to stock market downturns, at least immediately. And I’d be surprised if it did, personally. But it’s a great question. You should always try to connect the dots, between different types of asset classes, because even if you don’t have that asset class, what you do own could be the source of funds that somebody uses to pay off something happens somewhere else. And so and that’s an it’s a great question as far as that goes.


Easan Arulanantham:

Yeah, and with China, there’s a lot of speculation that the reason they’re doing this is more control. Essentially shifting people to a “Digital Yuan”, which they have, essentially, the ability to track, rather than having those kind of cryptocurrency things.


Tom Vaughan:

Yeah, they talked about, they were going to bring out the “Digital Yuan” and, what have you… It would make sense, in a competitive environment, where they can control like they can and say, “Hey, you can’t use Bitcoin or Dogecoin. There’s 8000s different cryptocurrencies now for transactions, but you can use the “Digital Yuan”. And the US has been talking about the “Digital Dollar,” that’s come up a couple of times, especially this summer. And so, do they do something similar? So that would be my concern as a cryptocurrency investor? Yeah, it’s a good point, actually. I think it’s partly a competitive situation. I’ve said that a long time ago, it’s one of the big problems: You’re going to end up competing against these countries and the regulators, and they can they can change the rules on cryptocurrency, basically overnight, which is what’s happened right now in China. So, not a big surprise.

Tom Vaughan is a Certified Portfolio Manager and CEO of Retirement Capital Strategies. Retirement Capital Strategies is a registered investment advisor located in San Jose, California.

The opinions voiced in these presentations are for general information only and are not intended to provide specific advice or recommendations for any individual(s). The information provided herein is obtained from sources believed to be reliable, but no reservation or warranty is made as to its accuracy or completeness. Statements and opinions are subject to change without notice. Asset allocation and portfolio diversification cannot assure or guarantee better performance and cannot eliminate the risk of investment losses. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. Accordingly, you should not rely solely on the information contained in these materials in making any investment decision as the material does not take into account your particular investment objectives, financial situation or needs and is not intended as recommendations appropriate for you. You must make an independent decision regarding investments or strategies mentioned in this presentation. Before acting on information discussed in this presentation, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial or investment advisor. Prospectuses, investment objectives, risks, charges and expenses of any investment product should be reviewed carefully before investing. This platform is solely for informational purposes. Advisory services are only offered to clients or prospective clients where Retirement Capital Strategies and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Tom Vaughan or Retirement Capital Strategies unless a client service agreement is in place. “Likes” are not intended to be endorsements of our firm, our advisors or our services. Please be aware that while we monitor comments and “likes” left on this page, we do not endorse or necessarily share the same opinions expressed by site users. While we appreciate your comments and feedback please be aware that any form of testimony from current or past clients about their experience with our firm is strictly forbidden under current securities laws. Please honor our request to limit your posts to industry-related educational information, comments and questions. Third-party rankings and recognitions are no guarantee of future investment success and do not ensure that a client or prospective client will experience a higher level of performance or results. These ratings should not be construed as an endorsement of the advisor by any client nor are they representative of any one client’s evaluation. Investment positions mentioned in these videos may be held in some of our existing portfolios. Tom Vaughan and Retirement Capital Strategies are unaffiliated and separate from those companies whose investment positions are mentioned and is not liable for their products or services.

By participating in any of these live streams, you agree that any questions submitted by you might be used by us in the future on this YouTube channel. We will not share your personal information.

If you have questions, please write to us at: asktom@talkmoneywithtom.com.

  • MoneyGuidePro®
  • Advent Software/Black Diamond Reporting
  • Riskalyze, Inc.
  • thinkpipes®
  • Right Capital
  • YCharts, Inc.