Bitcoin is one of the hottest topics among amateur investors and one of the least understood investments to both amateurs and professional investors alike. Stories of investors turning thousands into millions in days or weeks are stuff of legend. (And point of fact has gotten the attention of the IRS which now requires all taxpayers to indicate if they have or ever have had investments in cryptocurrency). FOMO (fear of missing out) has caused normally rational (and conservative investors) to ask how they can get their hands on Bitcoin.
Bitcoin and other (there are many) cryptocurrencies are currencies that exist in electronic form on the web and are reported on a platform known as Blockchain. All cryptocurrencies (including Bitcoin) are speculative, carry inordinate amounts of risk, are inappropriate for conservative (even moderate) investors, and should currently be viewed in the same category as a good game of black jack.
Bitcoin specifically was recently described to me by one of the nation’s top fund managers as a technology ‘religion’ in the sense that investors are either believers or apostates. In other words – whether Bitcoin rockets into the atmosphere or crashes and burns – is a flip of the coin. Not the basis for sound, long-term investment. Yet. Or, maybe, ever.
Blockchain is a different story. Blockchain is a technology that has many demonstrated uses and seems able to provide investors with reasonable expectations of long-term value. While cryptocurrencies may have a bright future (yet to be seen) Blockchain is viewed by many as having demonstrated value and potentially a place in the portfolios of many investors.
Do cryptocurrencies or Blockchain investments belong in your portfolio?
It depends. It always does. It depends on your goals, your timelines, your ability to sleep at night, and how such an investment might fit into your overall investment strategy.
If you wish more information on these ideas, please reach our office, speak with our More than Money advisors and make a decision that best fits you.