Guest post by our Certified Financial Planner,
To book a Financial Planning appointment with Rocco,
Over the last twelve months, my inbox has been filling with the same email from my clients - "Should I invest in Bitcoin?" Considering their individual circumstances and the personalised ethos on the advice I give, my answer to every one of these emails has been a consistent "No."
At Tupicoffs, we pride ourselves on giving highly personalised, independent financial advice, and I can firmly say that I would not advise any of my clients to purchase Bitcoin on the simple basis that it is not an investment - it's a gamble.
What is Bitcoin?
Bitcoin was proposed a decade ago by "Satoshi Nakamoto" - a pseudonyum for a still unidentified software developer and mathematical brain. Originally created as an electronic, decentralised and non-tangible currency, it is one type of many cryptocurrencies that are currently being traded in the online space.
At this point, there is only a finite amount of Bitcoin available, 21 million of them to be exact, unless protocol changes and allows access to a larger supply.
Bitcoin is now a somewhat widely accepted currency for stores such as Amazon, Etsy and Wordpress. Many believe cryptocurrency will be the currency of the future, but for right now it's volatile and it has its sceptics.
Why we avoid it
Bitcoin has been a really volatile market, particularly since "cryptomania" has set in over the last few years and people have been buying in based on hype, and no real knowledge of the value of what they are purchasing. We have seen Bitcoin rise and fall and rise again like a toddler learning how to walk.
Further to this, there is a lot of difficulty in identifying the fundamental value of Bitcoin – or lack thereof. There are always aspects of an asset that gives it value like rent from a property or profit from shares, and these investments are generally attached to a national economy. Bitcoin and its fellow cryptocurrencies do not possess these value-adding properties, and anyone buying bitcoin is basically gambling on an intangible theory with no real value. It’s only measurable quality is people’s enthusiasm and how much they are willing to pay for it.
Our clients need stable investments to make financial choices to reach their goals. Imagine if you walked into your favourite coffee shop one day and your coffee cost $4. What if that exact same coffee cost you $6 the next day, and $35 the day after that, and back down to $3 the following week? You'd be a bit confused and have a hard time choosing to get your coffee there every day based on a blind guess that your coffee might be $4. This same uncertainty and volatility around bitcoin is why we can't make appropriate projections and decisions for our client on such a volatile "investment".
Our clients' long-term goals are our first priority, and considering the unpredictability of the Bitcoin and Cryptocurrency market, we just can't guarantee success if we were to recommend Bitcoin as an investment.
It does not matter how risk friendly our clients are, this one is still just that bit too risky.