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Is it wise to invest in Bitcoin and other cryptocurrencies? The question has been hotly debated across kitchen tables, institutional boardrooms, and even among financial advisors and their clients. As might be expected, there are divergent opinions on the issue and a wide range of potential outcomes for investors.
For many investors, the world of cryptocurrency remains, well, cryptic. So, what exactly are cryptocurrencies or cryptos, and what’s all the fuss about?
Bitcoin has seen tremendous gains, benefiting from increased demand from individual and institutional investors alike.
Despite this newfound attention, Bitcoin and other cryptos lack some of the qualities that more-established asset classes exhibit:
Cryptocurrencies lack the infrastructure and regulatory oversight of more traditional financial assets.
Regulators appear to be gearing up to increase their oversight of the popular new vehicles:
There remains little consensus on these emerging assets. Even high-profile investors who generally adhere to the same strategy are coming down on different sides of the crypto debate. Value investor Charlie Munger, for instance, has reportedly called Bitcoin "disgusting and contrary to the interests of civilization." Yet Bill Miller, another well-known value investor, is reportedly a Bitcoin bull and Bitcoin billionaire, owing to early investments in the currency.
With that lack of consensus comes both opportunity and risk. It’s important for individual investors not to confuse trading in ultra-risky assets, such as cryptocurrencies, with more tried-and-true approaches to investing. For individuals with a long time horizon, a high tolerance for risk, and the discipline to keep wagers very small, there can be a place for buying assets that swing wildly from day to day, sometimes hour to hour. Investing, though, is more about growing and/or protecting your wealth to meet specific goals, whether a vacation or safe retirement. To meet those goals, investors are well-served to continue to rely primarily on assets such as stocks and bonds that have reliable track records and safeguards.
The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Advisor Services Holdings C, Inc., d/b/a Kestra Holdings, and its subsidiaries, including, but not limited to, Kestra Advisory Services, LLC, Kestra Private Wealth Services, LLC, Kestra Investment Services, LLC, Bluespring Wealth Partners, LLC, and Grove Point Financial, LLC. The material is for informational purposes only. It represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. It is not guaranteed by any entity for accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was created to provide accurate and reliable information on the subjects covered but should not be regarded as a complete analysis of these subjects. It is not intended to provide specific legal, tax or other professional advice. The services of an appropriate professional should be sought regarding your individual situation. Kestra Advisor Services Holdings C, Inc., d/b/a Kestra Holdings, and its subsidiaries, including, but not limited to, Kestra Advisory Services, LLC, Kestra Private Wealth Services, LLC, Kestra Investment Services, LLC, Bluespring Wealth Partners, LLC, and Grove Point Financial, LLC does not offer tax or legal advice.