Because cryptocurrencies such as Bitcoin have the potential to save consumers money through “disintermediating traditional financial institutions” and cutting down on government manipulation of currencies, they will certainly play a role in the future, financial advisor Joe Elsasser tells ThinkAdvisor.
Investing in the Pick-and-Axe Sellers
But there’s no predicting when this will happen, which cryptocurrency will dominate nor how it would affect the economy at large, according to Elsasser, president of Covisum, ThinkAdvisor writes. Therefore, getting into individual digital currencies is is either a speculative or an emotional move — and one which financial advisors should steer their clients away from, he tells ThinkAdvisor.
Investors who truly believe in cryptocurrencies could instead invest in companies that support the market—miners, for example—or will benefit from it as it develops—such as nontraditional financial institutions, according to Elsasser. That way investors can get in on cryptocurrencies without joining the volatility they’re bound to go through in the near future, he tells the publication.
Despite cryptocurrencies having been around for a decade, after billions invested in them, there’s still no practical use for them, Renaud “Ron” Piccinini tells ThinkAdvisor. Nonetheless, it doesn’t mean that blockchain won’t be put to good use one day, enabling it to revolutionize parts of the economy, according to Piccinini, director of product development at Covisum.
But that could be decades away — and until then, cryptocurrencies and blockchain come with great risk, he tells ThinkAdvisor. Many of them will turn out to be losers, much like firms that came out during the spread of the internet, according to Piccinini. But investors should remember that even winners like Amazon were a “wild ride”: the company’s stock soared by a multiple of 56 in the first couple of years and then gave back 95% of those gains in just two years, for example, he tells ThinkAdvisor. Piccinini suggests that investors only allocate what they can afford to lose in cryptocurrencies — and only half of that, keeping the rest “for the next new thing.”
