Token Advice - #1 🚀

401 Financial Launch | Money Beliefs | One Billion NFT Holders | ETH vs. BTC | Accessing Venture Capital

September 23, 2022

Hey everyone,

👋 Welcome to our first monthly newsletter!

🙏 Before we begin, we would like to say thank you to all our early clients, partners, families, and friends who made the 401 Financial launch so special. You all mean the world to us.

❓ So what is Token Advice? In short, Token Advice is a curation of what the 401 Financial team is reading, writing, listening to, and thinking about at the intersection of crypto assets, financial planning, and traditional finance. We didn’t see a newsletter out there that consistently combined these 3 topics, so we decided to create one for you. We hope you enjoy!

👇 Now lets dive right in.

4 Insights

🚀 401 Financial Launch

After months of building behind the scenes, we’ve officially launched the nextgen RIA for the right now investor. We set out with a mission to bring financial planning, empowerment, and education to the underserved and underrepresented. We won’t stop until every person we come across can say that they have access to financial advice.

How We’re Different:

  • A Connected Experience - Access your financial plan & advisor from your phone. Anywhere. Anytime.

  • Wholistic - Get advice on your entire financial picture, not just your investments. From cash and debt management to real estate.

  • Made Simple - Flat monthly fee, say goodbye to 1% AUM fees of the past. No account size minimums.

  • Education Focused - We don’t gate-keep information. We believe in sharing our knowledge so you no longer “need” us but choose us.

  • Crypto, We Get It - Best-in-class crypto advice. Whether you currently hold or seek to hold crypto assets and utilize the ecosystem.

  • Community Driven - We donate a portion of our revenue, provide free or reduced-cost services, and participate in financial education programs.

It’s a new era of financial advice. Check out our launch video below!

One of our favorite developments in the financial advisor space over the last few years is the rise of behavioral finance as a core component to advisor education. The CFP board has recently included the topic in their curriculum and awesome new tools such as our friend Brian Portnoy’s Shaping Wealth are now available for advisors. The best investment portfolio in the world can be derailed if we can’t manage our emotions.

5 key questions are outlined in this article written by Sarah Newcomb, they’re well worth your time to think deeply on.

“Where we're going is a sea of free NFTs, with 3 billion people with active wallets because they got their NFTs for free, and some of them might be valuable to someone else.” - Gabe Leydon

Most innovative technologies tend to start out as speculative and playful before they become disruptive. NFTs are likely no different. This fascinating conversation between Patrick & Gabe feels like a glimpse into the future as they as they go deep on how the NFT ecosystem could develop over time.

What we must keep in mind with exponential technology is that the use cases today will look nothing like the use cases in the future. At some point in the next decade, we’ll likely all own an NFT for one reason or another. Will it be for memberships? Tickets to events? Tokenized real estate? All of the above? As the onramp to building NFT communities becomes more simple over time, we’re in agreement with Gabe that this could unlock billions of people to enter crypto for the first time.

👀 ETH vs. BTC Chart

One of the biggest events in crypto’s short history happened on September 15th as Ethereum transitioned from Proof-of-Work to Proof-of-Stake consensus mechanism. The merge went flawlessly and many described the feat as changing a plane engine during flight. With thousands of applications, millions of users, and billions of dollars on the line, a decentralized group of developers were able to ship a highly complex upgrade. The importance of this can’t be understated in regards to the future of decentralized work. This isn’t just a win for the Ethereum community, but for all of crypto.

Prior to the merge, investors questioned how much of the post-merge dynamics were “priced in”. Arguably the biggest change following the merge is the shift in supply. Proof-of-Stake is likely to cut issuance of new Ether drastically, potentially turning it into a deflationary asset. One of our favorite tools to track this is Ultrasound Money. On top of the bullish supply dynamics, many claim that Ethereum’s energy consumption will fall by more than 90%. In a world where ESG continues to gain momentum, we can see how this could positively impact institutional inflows to the asset. TBD.

These changes haven’t lead to an increase in Ether price post-merge. So far, we’ve seen a sell the news event with Ether dropping approximately 20% since the merge went live. It will take time to see how these shifts play out. Most importantly, there are many factors at play and market participants will ultimately determine the fair value over time.

Should we be surprised that ETH ran into resistance versus BTC at this level? There looks to be overhead supply that was again met with selling pressure. We’ll be watching for a breakout, but in the meantime Bitcoin remains the top dog.

1 Bonus

This is a phenomenal research report written by Kai Wu of Sparkline Capital.

VC index returns have trounced the public markets dating back to 1995. Granted, historically it’s been difficult to get broad VC exposure. At 401 Financial we’re working on a few things to help solve for this. Stay tuned. 😉

On top of the outperformance, the median age at IPO for US companies has risen from 7.9 to 10.8 over the past few decades. Companies are staying private longer. Who doesn’t get to fully participate? The average public markets investor.

Kai mentions DoorDash as a perfect example of this. 3 years may not seem significant, but look at the valuation growth in those last 3 years pre-IPO.

Kai then lays out a liquid venture replication strategy using small public equities that are:

1. Young

2. Small

3. Fast Growing

4. Innovative

Check out the full report to see the framework of this strategy, it’s super interesting.

Now for our favorite visual! Notice how BTC, ETH, & small-cap crypto assets make up well over 50% of crypto valuation, while public stocks make up a sliver. “Blockchain” ETFs may be accessible, but they very clearly don’t get investors broad crypto exposure.

We don’t see this tokens vs. stocks trend reversing as on-chain tokenization further expands in the crypto asset space. Most importantly, this could be a big unlock for the average investor to access highly innovative early stage companies/protocols.

📖 Looking for more? Check out the links below.

Final Bits

📚 Articles

🐦 Tweets

🎧 Podcasts

📝 Long Form Reports

🧰 Tools

🟪 401 Financial

  • Get to know our Advisory Board!

  • How we’re using on-chain tools at 401 Financial

  • Send us your wallet address for a free 401 Financial NFT

Thank you for taking the time to check out our first Token Advice newsletter! Much more to come. Enjoy your weekend.