Bitcoin has become headline news again as it approaches its highest ever valuation this week, surpassing $ 19,000 (£ 14,230), before falling back down toward the $ 16,500 mark thereafter.
An increasing number of professional investors argue that Bitcoin, the oldest and largest cryptocurrency by market value, deserves a place in a diversified portfolio.
Skeptics contradict that Bitcoin has no intrinsic value because few people use it to buy things, it has not been proven as a “safe haven” asset and faces the threat of legal clampdowns and could make it worthless.
So should you buy some? And is it ever safe to do so?
‘Bitcoin is a gamble’
Investors should steer clear, according to Felix Milton of Philip J Milton, a financial planning firm, because governments could at any moment interfere and ban it as a currency, making it illegal to own. “At present it is allowed to operate but that may not last forever,” he said. “I would strongly advise against investing unless it is regulated by Government.
“If this were to happen, it would reduce price volatility and legitimize it as an investment. But right now it’s too risky to be a serious investment and it’s more of a gamble. ”
Simon King of Vermeer Partners, a wealth manager, said Bitcoin faced two major hurdles before it could be considered investing. He said it needed to be used as a method of exchange, like other currencies, but this was not the case at present. Secondly, it needed to be accepted as a store of value, like gold, but as it was only launched in 2009 it was too early to bring this to a close.
“All of this, combined with fraud and theft issues, severely limits its merits for a serious investor. For those who want to take a little gamble on interchangeability, fine. But investing as part of a considered strategy and portfolio should not be an option, ”he said.
Invest with care
But the volatility and status of Bitcoin’s newcomer does not despise all professional investors. Tancredi Cordero of Kuros Associates, a wealth manager, said the most important reason for owning Bitcoin was that it acted as a “hedge” as its price moved in different directions to other investments, including gold.