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Like Moths to a Flame - Bitcoin attracts speculators with the promise of easy money

Bitcoin mania has swept the globe, with the electronic cryptocurrency approaching $300 billion in value.

Some stories surrounding Bitcoin beggar belief. A major publication tells of a man who shut off his furnace because he generates sufficient heat from the racks of computers that support his bitcoin trading. Some have estimated that bitcoin transactions now consume more energy than all of Ireland leading to warnings that energy-intensive bitcoin mining could one day endanger the planet!

This mania is being fueled by spectacular gains and intense media attention. The currency has risen from just over $1,000 in January to more than $16,000 recently.

Such gains are not actually uncommon in the investment world. More than 400 stocks around the world have risen in price by 1,000% over the past year. As one Bloomberg columnist notes, “Chances are you aren’t too worried about missing out on those opportunities, because you haven’t been inundated with a breathless play-by-play of their ascent.”

At the end of the day, bitcoin is not a suitable investment or strategy for wealth creation. One of the core tenets of our investment philosophy is that fundamentals matter. We seek investments that make good economic sense. Stocks, for example, allow investors to participate in corporate earnings and dividends. Bonds provide stability and generate income. Bitcoin, on the other hand, offers nothing except the hope of selling it at a higher price. Its pure speculation.

Our advice — stick with a diversified portfolio of quality, fundamentally sound investments, and don’t get burned by the allure of easy money, which all too often becomes an easy way to lose a lot of money.

 

DISCLOSURES: This report is based on data obtained from sources we believe to be reliable. Hefren- Tillotson does not, nor any other party, guarantee the accuracy or completeness of this report or make any warranties regarding results obtained from its usage. All opinions and estimates included in this report constitute the firms judgment as of the date of this report and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation to buy or sell the securities herein mentioned.

DISCLAIMER: Past performance does not predict future results. This report is based on data obtained from sources we believe to be reliable. Hefren-Tillotson does not, nor any other party, guarantee the accuracy or completeness of this report or make any warranties regarding results obtained from its usage. All opinions and estimates included in this report constitute the firms judgment as of the date of this report and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation to buy or sell the securities herein mentioned.
Investment Advisory Team
Hefren-Tillotson

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