Steve M Wyett- CFA, Chief Investment Strategist, BOK Financial.
Many retail investors are worried about the speculation that the new cryptocurrency winter will heat up faster than Bitcoin in February. Bitcoin, or more broadly crypto assets, is a topic that I am receiving more and more questions as Chief Investment Strategist. In an environment with sufficient liquidity and short-term interest rates close to zero percent, there may be a compelling desire to take risks and seek returns. And cryptocurrencies are one of today’s most risky assets, as seen in the sharp drop in prices in May. If you think this is the ultimate buying opportunity, there are a few things you might consider adding to your investment equation.
Overall, the subject seems to be divided between believers and non-believers. Despite the volatility of the first half of 2021, we need to admit that we don’t have to zoom out for more than 12 months until some ciphers are multiples of ourselves. And while the price of crypto is rising significantly, there are many risks within crypto assets. Among the laws, regulations, cybersecurity, and myriad options (currently over 5,500 different cryptocurrencies are listed), there is a lot to stay up late in the compliance departments of investors and investment companies.
Today, the exchanges on which crypto assets are traded are generally unregulated and subject to hacking and complete fraud. This is not the type of marketplace that is comfortable for making general recommendations to clients. In addition, the IRS has just begun to formally produce guidance and potential reports on crypto asset ownership and transactions. You can be confident that the IRS is looking at increasing the value of crypto assets and is looking at ways to ensure that this increase is properly reported and taxed.
Someone who knows a lot about another ghost, the creation of currency and value from the thin air, may be waiting on the wings. The Federal Reserve does not seem to be very kind to becoming “out-currency” and seems to be on track to develop its own central bank digital currency.
However, not all government agencies and adjoining agencies are obstacles. The Securities and Exchange Commission (SEC) and other regulators are working to increase oversight of the crypto asset market. This should make these markets bigger and more efficient. When this happens, storage security and reduced transaction time and costs increase a company’s investment capacity. This will begin to establish the basis for companies to provide recommendations within their client accounts.
After all, there is a lot of work to be done to acquire crypto assets across the line from a trustee’s point of view. That is, you won’t be able to see it as an option for a 401 (k) plan or any investment account. in a few days. That said, many banks and wealth management providers, including ourselves, are looking for ways to provide access on FCM platforms.
In the meantime, Bitcoin has gone from about $ 10,000 to $ 65,000 to $ 30,000 in 12 months, highlighting the extraordinary amount of volatility that crypto can show. It’s certainly not for the weak. Although the value of the crypto asset market has increased significantly over the last decade or more, it is important to understand that crypto assets are still very speculative and carry risks that may seem very difficult to avoid and manage. Emphasize sex. As long as this is the case, guess responsibly. Invest only what you can afford to lose.
The information provided here is not investment, tax, or financial advice. You should consult a qualified professional for advice on specific situations.
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