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Bitcoin became headline news again as it approached a record valuation this week, surpassing $ 19,000 (£ 14,230), before subsequently falling back to $ 16,500.
A growing number of professional investors argue that Bitcoin, the oldest and largest by market value, deserves a place in a diversified portfolio.
Skeptics argue that Bitcoin has no intrinsic value as few people use it to buy things, is not proven to be a “safe haven” asset, and faces the threat of legal crackdowns that could render it useless.
So should you buy some? And is it ever safe to do so?
“Bitcoin is a game of chance”
Investors should stay away, according to Philip J Milton’s Felix Milton, a financial planning firm, because governments could step in at any time and outlaw it as a currency, making it illegal to own. “It is currently allowed to operate, but it may not last forever,” he said. “I strongly advise against investing unless regulated by the government.
“If that happened, it would reduce price volatility and legitimize it as an investment. But right now it’s too risky to have a serious investment and it’s more of a gamble than anything else. “
Simon King of Vermeer Partners, an asset manager, said Bitcoin faced two major hurdles before it could be considered investable. He said it was meant to be used as a means of exchange, like other currencies, but at the moment it wasn’t. Second, it had to be accepted as a store of value, like gold, but since it was only launched in 2009, it was too early to finish.
“All of this, coupled with the problems of fraud and theft, drastically limits its merits for a serious investor. For those who want to make a small bet on volatility, that’s fine. But it shouldn’t be an investment choice as part of a thoughtful strategy and portfolio, ”he said.
Invest with care
But not all professional investors are put off by Bitcoin’s volatility and newcomer status. Tancredi Cordero of Kuros Associates, an asset manager, said the most important reason for owning Bitcoin is that it acted as a “hedge” as its price moved in different directions from other investments, including gold.
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