Gold is one of the first functional currencies used by humans as a unit of account for trade. The value then comes from what people value gold for in society at that point in time.
Bitcoin is one of the first functional cryptocurrencies used by humans as a unit of account for trade. The value then comes from what people value bitcoin for in society at that point in time.
Bitcoin, the largest cryptocurrency by market capitalization, broke through $10,000 on December 17th 2017 and then once again on January 14th 2018. However, Betterment does not recommend holding any cryptocurrency as part of a long term investment strategy.
There is more than one way to look at cryptocurrencies like bitcoin. One way is to compare them to their alternatives like gold or fiat currencies which have both be used as stores of value or money in different periods throughout history.
Recently, cryptocurrencies have surpassed many of the all time highs they saw in their initial surge in popularity. However, Betterment does not recommend holding any cryptocurrency as part of a long term investment strategy.
Gold is one of the first functional currencies used by humans as a unit of account for trade. The value then comes from what people value gold for in society at that point in time.
The early days of the cryptocurrency gold rush are over, but bitcoin still holds value for investors in a portfolio context, according to one financial services company.
“You can’t look at [bitcoin] as a standalone investment,” said Jon Stein, chief executive officer of Betterment, which manages around $5 billion in assets.
“The time when everyone was going to go out and buy bitcoin because it might have been a better investment than adding another point to S&P 500 — I think that time has passed.”
During an appearance on CNBC’s “Squawk Box,” Stein said that cryptocurrencies have been difficult for many to understand from both a practical and technical standpoint. For this reason he believes that there is little chance the price will experience a short-term surge like the one it saw at the end of 2017.
“I think that if you want to own cryptocurrencies, and not just bitcoin, then you have to be willing to forgo some potential gains in the near future,” he said. “With such extreme volatility [ahead], I don’t know how high we could go.”
He also stated that while anyone interested in investing should not put all their eggs into one basket, people should diversify across multiple cryptocurrencies regardless of what they believe will happen with bitcoin over the next six months or year. For example, a better approach would be to buy a small percentage of bitcoin along with a small percentage of ether and other popular coins.
Stein’s comments are interesting considering that they are coming from the CEO of a company that recently added cryptocurrency options to their platform. This serves as good publicity for Betterment, but also gives them insight into how their clients feel about investing in cryptocurrencies versus traditional securities.
To date, Stein believes that there is no evidence that investors will begin to favor cryptos over stocks or other types of assets. He does not see this changing any time soon either, though he did admit it may happen at some point down the line after people have more education on why they should invest in cryptocurrencies besides mere speculation.
“I think what you’ll find with mainstream users adopting bitcoin is they won’t be using it as an investment,” he said. “They’ll use it like Venmo.”
