Should Individuals Invest in Bitcoin?
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What is the main topic discussed in this episode?
This is Your Money Matters from The Wall Street Journal. Welcome to Your Money Matters. I'm J.R. Whalen in New York.
Why is Bitcoin's fourfold rise this year prompting investor interest?
Bitcoin's value has shot up fourfold this year, and a series of so-called initial coin offerings has raised more than $2 billion. So is investing in Bitcoin a wise move? The Wall Street Journal's Daisy Maxey joins us with some answers. So, Daisy, what's the verdicts?
Well, it depends on who you ask. But a lot of financial advisors are busy telling their clients no. I mean, they're in a very unique position because many of them have a fiduciary duty. And they consider Bitcoin still a very speculative and risky investment. So they're warning clients not to invest.
But I mean, the value has run up so much and it's going to the moon. And still they're saying now is not the time to jump in.
That's the tough part for these advisors, because here are their clients watching Bitcoin go from about 960 something early this year to over 5,000 now, $5,000 per Bitcoin. So that is hard for people to sit on the sidelines and say, no, I shouldn't have a hand in Bitcoin. They're getting more and more queries, these financial advisors, from their clients. But, you know, what they're telling them is if you do want to invest, don't risk anything more than a trivial amount. And what's trivial, of course, depends on who you are. For a lot of people, that wouldn't be a lot of money. And they don't want them to risk anything that they can't afford to lose.
You spoke with a financial professional who talked about not investing more than a trivial amount, and the person gave you some good tips for anyone who's considering making an investment.
Again, you know, what is trivial will depend on the person. You know, some people may have $100,000 to risk. For some others, it might be just a few hundred or less, or they shouldn't maybe risk any money at all. But this advisor advised that folks should have their emergency savings in place before they even consider it and be on track with long-term goals. And that includes things like saving for college, saving for retirement, things that are obviously a lot more important than speculating on the markets.
And a lot of common sense. Don't bet the house.
Why are many financial advisors telling clients not to invest in Bitcoin?
Don't bet the college education. That makes a lot of sense. And it really is. That's good best practices for a lot of investing, cryptocurrency or not.
That's right. And what people lose sight of when something rises this rapidly is the risk. They don't look at the idea that it can go down just as quickly. They don't bank on that. And the risks of this, it's extremely volatile. And we've seen several big shocks to Bitcoin where it's dropped dramatically very quickly.
And we're speaking with The Wall Street Journal's Daisy Maxey about investing in Bitcoin and the pros and cons. And you are listening to Your Money Matters here at The Wall Street Journal. Welcome back, everyone. So, Daisy, in your story in The Wall Street Journal, you point out that some financial professionals feel that while now is not the time, in their opinion, to invest in Bitcoin, down the line could be the right opportunity. But it seems as if they're looking for a little bit more regulation or oversight in that area.
Yes. And I think advisors would – a lot of financial advisors would certainly be more comfortable once there is some more regulation around this. What's happening is that certain countries are stepping in. China, for example, this year banned initial coin offerings or said it was going to ban initial coin offerings. And and Bitcoin plummeted for days on that news. There are some filings out there for ETFs. A lot of asset managers would like to launch an ETF based on Bitcoin, that invests in Bitcoin, but they haven't received approval from the SEC yet. And in fact, one filing was pulled this year because the folks who filed it just don't think regulation has moved quickly enough that the SEC is ready to do this.
So until that happens, I think there's still a lot of question marks because every time a regulator does step in, either to approve something related to Bitcoin, then the price of Bitcoin may rise quickly.
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Chapters
4 chapters
1
What is the main topic discussed in this episode?
0:02–0:14
2
Why is Bitcoin's fourfold rise this year prompting investor interest?
0:14–2:19
3
Why are many financial advisors telling clients not to invest in Bitcoin?
2:19–7:04
4
What practical rules do advisors recommend before buying Bitcoin?
7:04–10:34
Speakers
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