A Bit on Bitcoin
Bitcoin has been in the news quite a bit lately, both for its meteoric rise and its sharp selloffs. We thought it worth taking a moment to sort out what we know and what we don’t know about bitcoin.
- It appears that bitcoin and other cryptocurrencies are here to stay. As noted at https://www.cnbc.com/2021/01/11/bitcoin-btc-price-nearly-170-billion-wiped-off-entire-cryptocurrency-market.html, the market capitalization of cryptocurrencies reached the $1 trillion mark earlier this year.\
- Some institutional investors have dipped their toes in the cryptocurrency waters, as noted at https://www.cnbc.com/2021/01/04/bitcoin-btc-rally-partly-driven-by-more-institutional-investors-pwc-says.html. So, bitcoin and other cryptocurrencies have started to establish a foothold in the financial world.
- Bitcoin may be a bubble. As reported at https://www.cnbc.com/2021/01/19/bitcoin-us-tech-stocks-are-biggest-bubbles-deutsche-bank-survey-says.html, a Deutsche bank survey of 627 market professionals found half giving bitcoin a rating of 10 on a 1-10 bubble scale. Considering that bitcoin is up over 800% in less than a year, such a view is quite understandable.
- Maybe the best description we’ve seen of bitcoin and cryptocurrencies was by Nick Maggiulli at https://ofdollarsanddata.com/why-ive-changed-my-mind-on-bitcoin/, who described bitcoin as a form of digital gold.
- We have no crystal ball telling us the future price of bitcoin. The gold market began less than 50 years ago, after President Ford lifted a prohibition on gold transactions. It will be interesting to see if cryptocurrency investments follow a similar path as gold. Given their high volatility, we would encourage those interested in cryptocurrencies to appreciate the risks involved and to size their investment appropriately.
JMS Capital Group Wealth Services LLC
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An SEC‐registered investment advisor.
This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument or investment strategy. This material has been prepared for informational purposes only, and is not intended to be or interpreted as a recommendation. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice.