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This is why NFTS are the future: analyst

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Ric Edelman, Edelman Financial Engines Founder joins the Yahoo Finance Live panel to discuss the latest market action.

Video Transcript

- For more on maybe all of these moves, obviously as crypto becomes larger and larger in terms of traditional investors looking at the space, I want to bring on a man who crossed over along with me. Ric Edelman here joins us, Edelman Financial Engines founder. And Rick, we all know you've been focused squarely in on this space, and we've been watching it closely. Last week, you know, the drama had been around the SEC and Coinbase and what they were looking to maybe step up in policing.

But where do you put us right now in this adoption cycle? I wonder if that maybe cooled what you see there in terms of investors really looking at Bitcoin as a hedge and traditional investors leaning in on that space.

RIC EDELMAN: I'm not sure if it's a hedge. I think it's a diversification tool, Zach, and I think that we're seeing the adoption of mainstream Wall Street engaging in this. Corporate America is recognizing that there there. You know, when you've got big huge companies like MassMutual investing $100 million and its CREO joining the board of a major crypto player, NYDIG, you begin to realize that this isn't just for the fringe any longer. But the big thing holding everybody back is the lack of regulatory clarity.

So there was round of applause in the crypto community when Gary Gensler was named Chair of the SEC. The assumption in the crypto community was that hey, this guy taught blockchain at MIT, he therefore is a big fan of this space, and he'll readily move forward with regulation and approval of a Bitcoin ETF, blah, blah, blah. Instead, what they're getting is a sound, careful individual who indeed knows the space so well you can't fool him.

And he realizes that adult supervision is needed, and we're going to see some regulatory clarity in months to come. And that's going to be really good for the space overall long term. It's going to get the fringe even more to the fringe, and it's going to allow the main players, those with the trillions in assets, to engage in this space with confidence.

- Yeah, and one of those big updates in terms of Gary Gensler and what people have been waiting on is the approval of a Bitcoin ETF. Of course, they have those in other jurisdictions, Canada being the one closest to us, but when you look at that, he was, I guess, floating the idea of approving one tied to Bitcoin futures, not necessarily underlying Bitcoin, which should be pretty different. What's your take on maybe how that wouldn't be as exciting maybe as people in crypto were hoping for?

RIC EDELMAN: It's a good move from a regulator's perspective because the SEC has clear jurisdiction over the futures market. Between it and CFTC, they can flex their muscles and guard consumers in engaging in futures. That isn't necessarily the case with Bitcoin, which the SEC has declared is not a security, therefore outside their jurisdiction. So unless Congress gives the SEC more control, it's easier for the SEC to say yes to a Bitcoin futures fund than to Bitcoin itself.

But investors, as you noted Zach, have to realize there's a big difference between buying an asset and buying a futures derivative contract on that asset. They are not always the same. Futures prices can move independently of the underlying asset. So if you're going to engage in a Bitcoin futures product, make sure you understand the difference and understand what you're doing so that you're not going to be surprised.

- The other thing too that we always talk about is the way that analysts now are kind of looking at some of these other chains in a way that they might traditionally try and figure out where the price is going to go on a stock. And we can talk about Ethereum and a lot of those transactions getting built there, a lot of the fees that come associated with it, so called gas fees, in these transactions exploding because of NFTs, non-fungible tokens.

And you seem to be bullish on that space. I will say the majority of my weekend was taken up by discussing whether or not these things were here to stay, whether it's just fraud similar to what you might see in the art space, but talk to me about why you think that that's important maybe for for Ethereum and why you're a big fan of where NFTS are headed.

RIC EDELMAN: Well, Bitcoin led to Ethereum, Ethereum led to NFTs, non-fungible tokens. This is the future, and this is where all the excitement really is. Now we could argue whether the the apes are worthwhile, or whether NBA Top Shot is worthwhile, basketball trading cards and and the artwork that you're seeing from Beeple and others. If you go to OpenSea, you'll see thousands of pieces of art, all of it online. Is there a there there, and is it nothing more than a Beanie Baby, the fad of the day?

But that's not the point. I'm talking about the underlying technology here. NFTS are the future because we can tokenize everything. And when I mean everything, I mean your house can be tokenized. Most Americans, their biggest asset is their home. In retirement, how do they generate income from their home? Well, if you tokenize your house, you can sell shares of your house, NFTs and generate income. You can tokenize your contract so that you can have people investing in your career and your future.

We'll be doing this with Hollywood actors and professional athletes. We'll be doing this with recording artists. You know, Bob Dylan has already sold his music catalog. So did Stevie Nicks. Wouldn't it be cool to invest in Blood on the Tracks so that every time the song is played on the radio you receive a little bit of royalty? Everything and anything can be tokenized due to this technology, and NFTs are the future.

- That's pretty fascinating to watch and see all the different use cases come through here and just which ones are going to be real. I do think that there is a lot of use cases, particularly when it comes to AR and clothing that's being sold so you get a matching NFT for the clothes you wear, in person and in the virtual world. Perhaps years down the road, but still something exciting to think about. But Rick lastly, kind of one of the things that is still getting pushback here in terms of the investment community might be the impact that all of this has on the dollar remaining king across the globe as kind of the reserve currency.

And El Salvador moving forward with accepting it as legal tender, Bitcoin that is, does kind of raise questions about whether or not the demise of the dollar is upon us. I mean, you already look at the way that we've been able to increase spending but don't have necessarily the right funds there in place to back up some of that spending. What could happen to the dollar in this next chapter? As you look at it, how worried should investors be about some of that demise of the dollar talk now?

RIC EDELMAN: I'm not worried about it at all. All we've got to do is digitize the dollar, and so you know CBDCS, central bank digital currencies. We're going to see the Federal Reserve issue a digital dollar before the decade is out. Just about every government around the world is going to do likewise because they don't have a choice. You know, they can't stop Bitcoin and other digital assets. All they can do is regulate it and compete against it by launching their own CBDC.

So the advent of Bitcoin as a currency, it's being used as noted by El Salvador now. Other countries are contemplating it, as well. To get Salvador to stop doing that, give it a digital alternative. Create a digital dollar, and that will preserve the American dominance. It'll ensure the regulatory environment that we all know and love because of the safety that it provides and therefore the consumer confidence. we need for the financial markets to operate. All we got to do, if you can't beat them, join them. And the sooner the better.

- Yeah, there are a lot of people out there hoping that it is sooner rather than later. And we'll see what happens there, of course. The SEC kind of kicking off maybe some of the questions around how quick they're going to be to move on this stuff. It's a lot to get to though so I do not envy their position. Ric Edelman bringing us the latest there with his thoughts, Edelman Financial Engines founder. Thanks again for the time, Rick.