What Do We Think About Bitcoin? - Adviser Investments

What Do We Think About Bitcoin?

After a meteoric rise in 2017 followed by steep declines, bitcoin returned to the headlines with a furious rally at the end of 2020. Is bitcoin an investment you should consider? Research Analyst Liz Laprade shared our philosophy on the prominent cryptocurrency in our recent webinar,* A Tale of Two Recoveries: Will Main Street Catch Up With Wall Street?

Please enjoy the excerpt below and click here for the full webinar replay to hear more. 

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Liz Laprade:

Is investing in bitcoin a wise move? In 2020 alone, bitcoin was up some 300%, and I think that’s making it easy to forget how volatile it has been historically. In 2017,  the value of bitcoin went from $1,000 to $19,000 and then crashed some 80% the following year. More recently, when the market corrected last March, the S&P 500 was down 34%, gold was down 3.5% and bitcoin was down 54%. That was before the run-up on the rest of the year.

Do we think it can be a sound investment? Well, you can put money into it and it will appreciate or depreciate in price. But it is a speculative investment. It’s risky and very volatile. I certainly don’t think of it as a preservation of value or a gold substitute. To be honest, it’s hard to even think of it like a stock, since there really aren’t fundamentals backing the value. The value of a bitcoin is basically what someone is willing to buy it for that given day.

I’m not completely against investing in bitcoin. I think it’s a really interesting story, but would I allocate a large portion of my portfolio there? Probably not, especially not after it has run up so much in such a short period of time. But I can  understand the investment thesis for some exposure. I think as long as you have the right risk appetite for it, then sure, buy some bitcoin. The advice I’ve been giving is this: Don’t buy more than you’re willing to lose.

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Click here for a replay of A Tale of Two Recoveries: Will Main Street Catch Up With Wall Street? Please contact us at (800) 492-6868 to learn more about our comprehensive wealth management solutions.

*Webinar recorded after the market closed on Wednesday, January 27, 2021.

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