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Bitcoin and Cryptoassets

Investment Management | , , , ,

It’s all over the headlines. The value is going crazy and everyone is wondering about it.  Bitcoin alone has gone from roughly $1,000 at the beginning of the year to $19,000.  A meteoric rise.

Bitcoin’s success has spawned other “cryptoassets.”  You can now buy Ethereum, Litecoin, or any of 1,000 other cryptocoins.  Together they have a market cap of around $500BN.  (Source:  As a point of reference, the market cap of the total world stock market is around $80 Trillion (as of 12-6-2017; source: Bloomberg) and gold is around $7.5 Trillion (source:

Like many others, we have been working to understand and research this new world.  We have the same questions that almost everyone is asking:

  • What is it and why are people buying it?
  • Is this a huge bubble? Are we witnessing the modern era equivalent of the tulip bubble?
  • Is it just the early innings for a world-changing new tool?
  • Is it too late, did we miss the gains?
  • What are the risks?

For anyone hoping for hard answers, I will apologize now and let you move on. I don’t believe anyone currently actually knows what the future will be for these assets. But there is no shortage of opinions. Jamie Dimon calls them a fraud and Warren Buffett believes they are a bubble. Yet, there are also numerous other “experts” extolling the virtues of this new medium.

A full discussion of the topic would take significantly more space, but we would be happy to discuss with anyone who is interested. What I will say for now, is that our analysis leads to a few conclusions:

  • As Bitcoin and other cryptocurrencies have no tangible assets or cash flow, valuing them is next to impossible. We believe trading in these should be considered as speculative trades and not investments.  If purchased, they should make up only a very small portion of an overall portfolio.
  • For anyone interested in making a purchase, do your homework. Make sure you understand what you are getting and getting into.  Security and regulation are still major question marks to think about.
  • Only invest what you can afford to lose. While we don’t know the odds, it would be prudent to expect that any investment could easily become worthless.  There is simply too much uncertainty and a lot of risk.

For those interested in learning a little more, some of the articles that I have found informative follow:

How Does Bitcoin work?

The Bitcoin Boom: Asset, Currency, Commodity or Collectible?
By Aswath Damodaran – Professor of Finance at the Stern School of Business at NYU.

Should Bitcoin Become a Bit of Your Portfolio?
By Allen Roth, founder of Wealth Logic LLC.