Wednesday Mar 07 2018
Smart Money: Let dust settle before investing big in bitcoin and other crypto currenciesBy: Marc Cuniberti / Guest Columnist
Has bitcoin and crypto currencies bit the dust?
From its meteoric rise of close to 2,000 percent in 2017 to a roller coaster ride which lopped off half its value a week or two back, this analyst is tempted to spout the words, “I told you so,” but I won’t.
My last media coverage of crypto did contain the quote “its wild price swings should at least be cause for concern for those investors thinking this is as safe as it gets. The price charts certainly are likely saying something quite different, at least to this analyst.”
So I didn’t exactly predict it was going to crash but you get the gist of the last article and its veiled, buyer-beware flavor.
From the perceived currency that “couldn’t be shot down” to the basement of heartbreak hotel for the most recent buyers of bit, you have to at least take notice of what’s transpiring in the crypto market just recently.
Obviously the blood bath that is the selloff is no cause for joy jumping, indeed some investors took a nasty haircut on the roller coaster of bit, but other things that are transpiring causes more concern from this analyst and probably should for you as well.
For crypto to act as currency of sorts, one quality it must have is to maintaining some sort semblance of value, meaning a 20-fold annual increase in price is anything but.
Maintaining a store of value means no wild ups and downs in price, so if it skyrockets in price, it’s as disturbing as a market bust because for every winner there is a loser in the world of money.
With such volatility in the crypto market, and not knowing how long a crypto will maintain its value and by how much, the serious boys in the banking business are saying “no mas” at least for now, to accepting crypto for charges or payments.
JPMorgan Chase & Co., Citigroup and Bank of America Corp. all announced they are no longer allowing purchases of bitcoin and other cryptos on their credit cards. We can imagine they fear if someone gets burned on a crypto purchase, they might well take it out on the credit card company and not pay their bill. Valid concern.
The Chinese and Indian governments meanwhile went after crypto trading sites and we can assume they won’t be the last government to do so. All in all, cryptocurrencies have to overcome at least some obstacles in order for this analyst and others to consider it a viable alternate to gold and other currencies. First, the price has to stop bouncing around like the proverbial ping pong ball. Currencies must maintain a store of value, and I might add at least a somewhat stable price!
Second, governments are known to be very jealous of competing forms of payment. Remember it is illegal to refuse the mighty U.S. dollar for all debts, public and private. Should bitcoin or some other facsimile become more widely regarded as a serious threat to the greenback, they have the means to stop its access by simply shutting down the apps and websites where they are traded. Ditto for all the other countries in the world should they decide so.
Right now the rollout for crypto is running into growing pains. With the mania like run up in price and now the subsequent crash or at least major setback, and with anxious governments breathing down its back, I think investors may want to consider letting the dust settle and see how this all pans out before committing large sums of money into cyber space. Caveat emptor, as they say, which means buyer beware.
This is not a solicitation nor recommendation to buy or sell any securities. Investing involves risk and you can lose money. Consult a qualified financial advisor before making any decisions and do your own research before investing.
Marc Cuniberti is an investment advisor representative through Cambridge Investment Research Advisors, Inc., a registered investment advisor. Contact him at SMC Wealth Management, 164 Maple St., No. 1, Auburn; 530-823-2792, moneymanagementradio.com.