The “original crypto” has been a hot topic for a while now in the financial world, but the economic uncertainty that has come along with the Covid-19 pandemic has shifted Bitcoin buzz into high gear.
While this spike has been a boon for those invested – like Elon Musk and the NFL player who took his salary in Bitcoin — it doesn’t mean that Bitcoin is the right trade or investment for everyone.
As the CEO of a commodity and futures brokerage firm, I’m well aware of the risks associated with Bitcoin, in both the short and long term.
The price of Bitcoin — and all cryptocurrency, for that matter — is incredibly volatile because it is such a young currency and market.
That might sound enticing now that Bitcoin is regularly trading at $50,000-plus but when you look at just a short time later, in February of 2018, the price had cratered down to under $7,000.
To put it another way, as uber-investor Warren Buffett did, “ has no unique value at all.” This makes it an incredibly risky investment if the market ever decides it’s no longer valuable.
One of the biggest arguments for investing in Bitcoin during and after the pandemic is that it is a great hedge against fiat currency, national banks or even the entire financial system, should it fail.
If fiat currencies or the traditional financial systems ever fail, governments and central banks would respond by holding tangible assets like gold in vaults as an alternative, not cryptocurrencies like Bitcoin.
If you are, then it’s important to fully understand what you’re getting into — not just what you can gain, but everything that you can lose.
However, NFA does not have regulatory oversight authority over underlying or spot virtual currency products or transactions or virtual currency exchanges, custodians or markets.