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Bitcoin - Should I Invest? Summer 2021 Bitcoin - Should I Invest? ryptocurrency is one of the most controversial investments in the market- place today. And, for every strong argument in favor of them, there is an C equally strong argument in opposition. Frankly, it is probably too soon to predict how this will all end, but I’m receiving enough questions about this unique investment option, that I thought I would use this forum to go over the various pro and con arguments so that we all can be more aware. Bitcoin, the world’s first cryptocurrency, was introduced in 2009, and with it, a new world of blockchain technologies and decentralized digital currencies was born. Twelve years later, there are more than 4,000 different cryptocurrencies in exist- ence. The surge in interest for this new sector has many people asking: Should I own Bitcoin? As Barron’s noted in its cover story on April 9, “with Bitcoin’s market value topping $1 trillion -following a 1,000% surge in the past year alone - it may be reaching an economic tipping point.” Bitcoin has had a meteoric gain, trading at below $10,000 in 2020, hitting an all-time high of $63,729 on April 13, 2021 before falling to around $54,000 by the end of the month. For a great example of the existing confusion with cryptocurrencies, just look to JPMorgan Chase. Dr. David Kelly, their Chief Global Strategist, rails against Bitcoin, making clear that he believes that it is not an effective store of value, nor is it a medium of exchange, and its value is based on pure speculation. Having said that, a few weeks ago, JPMorgan Chase announced that they are introducing an actively managed Bitcoin Fund this summer for their private wealth clients – seem- ingly to go completely against what their head economist thinks! Over the 12 years that Bitcoin has been in existence, we have seen that cryptocur- rency act more volatile than just about any other asset class. Volatility, however, doesn’t mean “loss” . it just means price fluctuations. In March 2020, when the equity market fell 26%, Bitcoin fell nearly 60% to a low of around $3,800. Since then, it has increased a remarkable 1,428% as of April 29, 2021 (Source: Bybt). Still, there are some pretty compelling reasons you might want to avoid Bitcoin. First, it is extremely volatile, making it a questionable store of value and an unrelia- ble means of exchange. As a result, Bitcoin (and other cryptocurrencies) are not a widely accepted form of payment. Some large companies such as Tesla, have started accepting Bitcoin to purchase their goods, but examples like that are few and far between. If you’re hoping to use Bitcoin to buy things, there doesn’t seem to be enough evidence to suggest that universal adoption will be possible for some time. In addition, Bitcoin is currently not treated as currency and therefore each transaction is a taxable event! Also, ownership is concentrated in the hands of only a very few long-term individual and institutional investors, who “Hold on For Dear Life” and don’t circulate the cur- rency. According to Bank of America Securities, 95% of all Bitcoin is controlled by 2.4% of all Bitcoin accounts. This gives a lot of power to a relatively select group. Its value, therefore, isn’t really based on an underlying asset but, rather, mainly on human sentiment and perceived scarcity, and this allows wealthy individual and large institutional holders to manipulate the price. Bitcoin is an unregulated asset stored in a digital wallet. The Securities and Ex- change Commission is very limited in what it can do if a hacker gains access to Continued on Page 3 Partner Profile Megan Sheridan-Byrom Meet our friend and local Medicare expert, Megan Sheridan-Byrom! Originally from Conyers, she grew up in the insurance business. Her mother, Rhonda Sher- idan, President of Sheridan & Associates, is a pioneer in the Medicare industry. Megan began helping in her mom’s office at the age of 13, by stuffing envelopes, faxing documents, answering phone calls, etc. Having that kind of exposure pro- vided her with priceless experience and knowledge that she still uses today to help her clients. In 2016, Megan earned her GA Life/Accident/Sickness license, and this past Jan- uary she formed her own independent subsidiary of Sheridan & Associates called Silver Lining Medicare Solutions. SLMS is an independent insurance agency specializing in the senior market. She helps to navigate the “Medicare Maze” by customizing solutions for each individual situation. When she’s not in the office, Megan enjoys reading, watching true crime documentaries, baking, sudoku, and spending time with her family. She and her husband, Josh, have been together for 11 years and have three children. Max is 9, Ellie is 7 and Charlie (who Megan affectionately refers to as “the boss”) just turned 5. And, of course, she and Josh stay busy with their kids’ various hobbies and activities. Max is very creative and really loves painting, drawing and building things. The two girls love doing ballet, and Charlie has just let her parents know that she would like to go to “Ninja School”, so they’re currently looking for Karate clas- ses for her. They love to travel as a family, and their two most frequented destinations are Dauphin Island in Alabama, and Daufuskie Island in South Carolina. They also really love cruises and hoped to go on an Alaskan cruise this summer, but, like so many of our trips, it was canceled due to Covid. So instead they flew into Seattle, rented a car and drove down the iconic and ultra-scenic Pacific Coast Highway to San Francisco! The trip lasted 10 days and they made plenty of fun “pit stops” at various national parks along the way. Megan has been an invaluable resource to our team and to many of our clients, and we’ve just really enjoyed getting to know her as a person over the years. If you have any ques- tions at all regarding Medicare or think you might need some help making your Medicare decisions, please contact her. And tell her you know us! Megan can be reached at [email protected] or 678-215-7293. I see people around my age mountain climbing . I feel good getting my leg through my underwear without losing my balance” - Jerry Seinfeld Bitcoin (Continued from Page 1) your virtual wallet and if your digital tokens are ever stolen. Speaking of digital wallets, if you can’t remember your pass- word, there is little help for you to gain access to your assets, so your investment can become worthless overnight if you (or your beneficiaries) can’t get into the account any longer. Many investment advisors, me included, are prohibited from providing any guidance on a digital asset platform. Common- wealth, my brokerage partner, for example, has done due diligence on cryptocurrency, and believes the risks of this asset class are just too high. They are concerned about the nascent nature of the market, the uncertainty of its future as a legit- imate currency, the strong probability of stricter government regulation, and its inherent price volatility. Until Blockchain technology becomes more broadly adopted, it is doubtful that cryptocurrency will be a widely accepted form of payment and it will likely continue to be one of the market’s most volatile sectors. Having said all of that, there are many arguments in favor of Bitcoin and so one must consider both sides of the “coin.” [Excuse my pun!] Over the past decade, Bitcoin has been the best performing asset class by far. The annualized rate of return through the end of April was 230% compared to the next best asset class, U.S. Nasdaq 100, which had an annualized rate of return of 20.0%. That’s more than a ten-fold difference! (Source: @CharlieBilello) Why? Basically, because scarcity increases an asset’s value and Bitcoin is no exception. With only 21 million Bitcoins available and about 18.5 million already in circulation, there is only a small amount left to be mined. As more people become aware of the asset’s scarcity, more demand rises, resulting in a higher price. And, this can’t change. Bitcoin creator Satoshi Nakamoto wrote the code to ensure that only 21 million Bitcoins can ever exist! One of the other factors beneficial to all cryptocurrencies is that, year after year, more companies are accepting it as a means of exchange. There are companies, such as BlockCard, Wirex and BlockFi, that offer Bitcoin Debit Cards that can be used for purchases. PayPal has also announced that it plans on rolling out Bitcoin acceptance to all of its merchants. As more companies start to accept Bitcoin as a form of payment and investment firms start to offer ways for their custom- ers to invest in the asset, mass adoption will come. In fact, we’re already seeing some mutual funds and exchange traded funds on the drawing board that will allow you and I to invest in cryptocurrencies. But beware, because, as the law stands now, taxation of Bitcoin remains a potential stumbling block in the U.S., as the IRS treats cryptos as property. As such, an investor who sells a crypto at a gain could be subject to capital gains taxes with every transaction. One other appealing aspect currently regarding Bitcoin is that it is not really regulated . and, as one can imagine, this makes it more valuable. While the Securities and Exchange Commission (SEC) classifies cryptocurrencies as securities, the Commodity Futures Trading Commission (CFTC) of the United States classifies Bitcoin as a commodity.
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