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As bitcoin rallies, IFAs warn: "You might as well have horse racing and poker in your portfolio"

ended 29. February 2024

This week, the price of bitcoin passed $60,000 for first time since 2021. As the crypto currency rallies, Newspage asked IFAs for their take on bitcoin. One said: “You might as well have horse racing and poker in your portfolio if you’re considering bitcoin.” A second commented: “Why not just buy the Nasdaq?”. Meanwhile, a third said simply: "Much like gold, bitcoin relies on the 'greater fool' theory. I wouldn't touch it with a bargepole."

6 responses from the Newspage community

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Samuel Mather-Holgate
Independent Financial Adviser at Mather and Murray Financial
You might as well have horse racing and poker in your portfolio if you’re considering bitcoin. There are no driving fundamentals, apart from speculation. The ‘commodity’ is backed by no government and no underlying assets and we have all seen how volatile it can be. If you invest, be prepared to lose all of your capital. It won’t be in my portfolio.
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Wes Wilkes
CEO at IronMarket Wealth
Bitcoin is not something UK advisers can advise on or allocate to, even if inclined to do so. It certainly is not a currency and not an investment, it is a speculative asset without clear fundamentals to determine its value. However, ignoring or dismissing its existence is rather foolish and rather arrogant, particularly as 2024 has seen the launch of 11 spot bitcoin ETFs that have already gathered more than $15 billion in assets. I would still be mindful to only use money that will never be needed and would not hurt if it was totally lost.
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Ross Lacey
Director & Independent Financial Adviser at Fairview Financial Management
At the moment, I can't understand any reason why the price of Bitcoin or any other cryptocurrency goes up or down. There's nothing obvious to give any indication that prices have a reason to go up in the future so anyone owning it now is relying on there being sufficient demand from others to buy it for more than they paid, aka the greater fool theory. In the same way that some people enjoy a flutter on the horses, buying scratchcards or playing the lottery, if this is money that they can afford to lose and they get a buzz out of investing in crypto then why not? However, we'd never build a financial plan for our clients that's reliant on cryptocurrency delivering any returns. It's just too speculative.
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Philip Dragoumis
Director and Owner at Thera Wealth Management
Bitcoin is a purely speculative asset. It is not a means of exchange, it has no cash flows or earnings. There is no use case for Bitcoin. As such, it is all price. As a speculative asset, it is also highly correlated to the Nasdaq, which begs the question: why not just buy the Nasdaq? That at least has real companies and real earnings. Bitcoin is also highly manipulated and cornered as a few large players control most of the free float.
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Nick Lincoln
Director at Values to Vision FP
Bitcoin is not an investment, it's a speculation. At best it's a currency. It produces nothing and has no intrinsic value. Much like gold, bitcoin relies on the "greater fool" theory. I'm not even sure advisers are allowed to advise on it. Not that it matters. I wouldn't touch it with a bargepole. As for my clients, they never mention it. They know better.
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Joshua Gerstler
Chartered Financial Planner at The Orchard Practice
The majority of the families we look after say they do not want too much volatility in the value of their life savings. Yet sometimes they ask if they should buy Bitcoin. If you speculate on Bitcoin, and I say speculate rather than invest, be prepared for a rollercoaster ride. It is not an investment that we would recommend to our clients, much like we would not recommend they speculate on other currencies such as the Yen or Euro. An investment should have the ability to provide a revenue stream to you, such as dividends from shares or rental income from a property. All Bitcoin does is make you constantly worry about the current price and whether or not now is the right time to sell. I would recommend that anyone planning for a secure and steady financial future avoid it.