Traditional Currencies v Crypto’s – beware the hype train
By Dale Gillham, Co-Founder and Chief Investment Analyst of Wealth Within.
Volatility in markets is inevitable, regardless of what investment mechanism you choose – unless you are in cash. Bitcoin has seen its fair share of lows and highs, just like world stock markets, we do not need to think too hard to remember the GFC, 1987 crash or the great depression.
A fraught stock isn’t always a bad thing, in fact it could spell opportunity. A market without any volatility is considered stale, boring and without any worthwhile profit. Does this mean one should abandon the traditional investment vehicles of stocks, bonds, traditional currencies and natural resources and run gladly into the open embrace of Crypto’s such as Bitcoin, Ether and CreamCoin? In my opinion, the answer is a resounding no.
Crypto markets have seen their fair share (get it?) of bad news, lately. The IRS confronted Coinbase over user data, China moved to ban initial coin offerings and froze tens of thousands of investors’ funds, and let’s not forget the double-tax ‘solution’ conversations.
Today, despite all this, Bitcoin’s market cap sits at nearly 100 Billion – that’s bigger than some major DOW components. Whilst remarkable, this does not mean it will last forever.
Should you stay or should you go?
A well-diversified portfolio is, and always will be, the key to share market success – this, and a comprehensive financial education. Yes, Bitcoin has seen some incredible gains driven by new capital entering the market. Add a splash of hype, a dollop of speculation and a generous spread of ignorance, and this has resulted in newly found consumer trust and subsequent adoption. With all that you can see why Bitcoin’s recipe for success has panned out. Unfortunately, folks, the future is still poignantly uncertain and you would do well not to have all of your eggs in the crypto basket when, yes when, it all comes crashing down.
Many international Governments want to support the blockchain technology, as they should. However, it is the unregulated nature of the crypto-currencies themselves that will see the Bitcoin’s and Ethers of the world struggle to make it mainstream.
It is for this reason why I say, by all means, dip a very small toe into the crypto market. Just remember; the hype-train will stop sometime and when it does it will leave a trail of destruction. Smart investors know that traditional investment vehicles regulated by Governments are the best and safest way to build real wealth, after all every bubble bursts but the trick is to not be in it when it does.
(A version of this piece first appeared on MONEY Magazine Australia, Authored by Dale Gillham).