Should You Invest in Bitcoin? - Adviser Investments

Should You Invest in Bitcoin?

Graphic of research analyst liz laprade answering if you should invest in bitcoin

Should You Invest in Bitcoin? Or should you wait for a more transparent digital currency that’s a better store of value? Here’s what Research Analyst Liz Laprade said in our recent webinar,  Booster Shots, Market Shocks and the End of Fed Intervention:*

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Liz Laprade:

Should You Invest in Bitcoin? It depends. Bitcoin’s not a sector, but I’m starting to think of it as sort of an asset class. Cryptocurrency and mainly bitcoin gained renewed interest last year. But this time is a little different than the boom in 2017 (which was followed by an 80% crash in 2018) because it’s not just individual investors buying in but financial institutions, companies and now investment vehicles.

ProShares just launched the first bitcoin futures ETF, which derives its price from underlying futures contracts. What are those? Contracts that have a predetermined locked-in price to either buy or sell bitcoin in the future.

The SEC was more comfortable approving a futures ETF than an ETF that directly invests in the spot price of bitcoin because futures ETFs can be much more easily regulated. That being said, it was still a big win for bitcoin bulls because it’s going to push the SEC to think about how they want to regulate bitcoin and allow more vehicles that directly invest in bitcoin to become publicly traded.

So, what does this mean for your portfolio? Equities and bonds offer somewhat predictable behaviors for diversification and return purposes. Bitcoin, on the other hand, is so volatile and unpredictable that I recommend not investing more than you’re willing to lose 50% of. And, given the wild price swings, you might want to invest over time so you can smooth out your cost basis. I mean, over the last week, probably due to the ETF announcement, bitcoin has gone up about 30%. It actually hit a new high over $66,000 today. Compare that with July, when it was below $30,000. So investing over time might help you smooth out some of those swings.

As for the future, I think that the hold crypto now has on the economy means that it’s not going away. Virtual currency and its related technologies have a place in the future of finance; I’m just not 100% sure what that’s going to look like.

Click here for more from Liz, including a replay of our recent webinar Booster Shots, Market Shocks and the End of Fed Intervention. Please contact us at (800) 492-6868 to learn more about comprehensive wealth management solutions. For more on bitcoin read our special report Betting on Bitcoin: Investment or Gamble?

*Webinar recorded after the market closed on Wednesday, October 20, 2021.

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