Bitcoin: Worth the Gamble?

Imagine hanging out in Las Vegas playing your favorite casino game.  Perhaps you are sitting at the hold’em table and the dealer flips the river card that gives you the win.  Or maybe you are at the roulette wheel and your lucky number just hit.  Or better yet, you just hit the jackpot at the slot machine.  That pure joy and excitement is how some Bitcoin investors feel right now as they try to grasp their potential 700% return in 2017.  But now imagine being on the opposite end of that same casino game and suffering that gut-wrenching feeling.  That is also how some Bitcoin investors are feeling after their poorly timed investment experienced one of the three 25% plus drops this same year.  So is it worth rolling the dice on Bitcoin?

Well first, what exactly is Bitcoin?  It is a digital currency that has no physical form and is not backed by any government, but it can be used for payments between parties who accept it.  All transactions occur without the need of an intermediary, like a bank, due to the underlying technology known as blockchain.  While there are many cryptocurrencies out there, Bitcoin was the first (created in 2009) and is by far the most popular.  It has been the talk of the investment world in 2017 due to its meteoric rise as investors have piled into the currency speculating on its future applications.  This year alone, the currency has seen its market capitalization rise from $15 billion to more than $130 billion and the price of a single bitcoin now fetches around $8,000.  So should we go “all-in” on Bitcoin?  Or should we just fold?

If you personally want to roll the dice with Bitcoin, we recommend betting responsibly and only investing what you can afford to lose.  If it happens to pay off, congratulations!  Enjoy those winnings!  But if you end up crapping out, at least your losses will not affect your retirement.  At Unified Trust, you will not find Bitcoin in any of your investment accounts.  Our portfolio construction focuses first and foremost on diversification and high asset quality to provide market-like returns with minimal risk.  While Bitcoin’s sevenfold returns this year may appear enticing, we understand that the volatile, unpredictable nature of Bitcoin makes it imprudent and not worth the gamble in our portfolios.

Investors may also feel that given current market conditions, investing in traditional equity and fixed income markets may be wagering too much.  With equities continuing to hover around record highs and the yield curve flattening, investors may feel the need to take some chips off the table.  However, just because these conditions exist, does not mean that markets cannot continue to rise.  Corporate earnings and economic data remain very strong.  The International Monetary Fund is now projecting the global economy to grow by 3.6% in 2018, consumer confidence as measured by the Conference Board is at a 17-year high, and optimism still surrounds at least some form of tax reform passing.

Still nervous?  Well instead of just completely cashing out from the market, we recommend reaching out to your Fiduciary Investment Advisor to discuss your risk tolerance and corresponding asset allocation.  With a proper allocation, we can help minimize the risk that may concern you while also helping to keep you on track to achieve your financial goals.  Just remember that as a true fiduciary, Unified Trust places your goals first and your assets are of the utmost importance to us.  This is not just another Vegas crapshoot.

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