In the tumultuous world of investments, where economic volatility is a constant component, psychology is pivotal and something that I pay attention to. Bidenomics has continued to hit Americans in our daily lives due to rampant inflation and volatility. Soaring costs span multiple sectors from real estate to energy, creating struggles for many families.  

In times of such economic distress, the appeal of potential quick gains, like those promised by cryptocurrency investments, can become even more tempting.

For over 30 years, I have advised clients on investment strategies and have seen numerous approaches, some successful and many others are not. I am not a fan (nor was I ever a fan) of Bitcoin because it lacks regulation and stability. I’ve seen investors tune out factual data such as earnings reports and valuations to chase after what very well might be a phantom.

Since its inception in 2009, Bitcoin has been on a turbulent journey. Facts are facts. Although Forbes hailed it as the best investment of 2013, Bloomberg labeled it the worst in 2014. In 2022, the leading cryptocurrency exchange FTX declared bankruptcy, which highlighted some of the risks in the crypto market. Despite regulatory sign offs like the SEC's approval of Bitcoin ETFs in 2024 (which warrants a separate article), skepticism remains due to the instability and long-term viability of cryptocurrencies.

My advice: Run, don’t walk away from adding Bitcoin or other cryptocurrencies to investment portfolios, especially for those seeking rapid wealth accumulation. It’s a losing game every time.

Here are three reasons why I believe Bitcoin is not worth the risk:

• Highly Dicey Nature: Cryptocurrencies such as Bitcoin are known for their extreme price swings and volatile behavior. While they may offer the promise of quick riches, the reality is that investing in crypto can be similar to gambling in a high-stakes casino in Vegas, with no guarantees of stability or long-term growth.
• Crypto Ain’t Currency: When investors purchase cryptocurrency, they are not buying a company, human capital, intellectual property or capital at all. The investor owns zero products or physical property.

When you buy a stock, you own a portion of a company. When you buy a bond, you have a portion of a company’s debt that's guaranteeing the payment of that bond. Cryptocurrencies leave investors vulnerable to wild price swings and unpredictable market behavior. When you buy crypto, you have absolutely nothing tangible. It has absolutely no place in an investment portfolio.

• Lack of Regulation: Unlike traditional financial markets, the crypto space operates with minimal regulation, leaving investors vulnerable to fraud and manipulation. Instances of hacking and cyber theft are real dangers and further underscore the need for regulatory oversight.

In the current economic climate, marked by weak policies and unprecedented government spending, some investors may view cryptocurrencies as a hedge against inflation. However, I caution against this narrative, as cryptocurrencies offer no cushion in times of economic uncertainty.

As investors grapple with the complexities of today's economy, it's essential to approach crypto investments with caution and shrewdness. The allure of cryptocurrencies can sometimes lead investors on the wrong path. Rather than chasing quick gains, I urge investors to prioritize solid investment beliefs, diversification and risk management. By doing so, they can safeguard their financial futures and navigate the challenges of the markets with confidence.

I tell my clients all the time that financial literacy should be lifelong, and investing on an impulse due to the latest “chic” way to make money fast are destructive to wealth creation. With knowledge comes power, and every investor should know exactly what they are doing with their money and why.

Instead of succumbing to the allure of cryptocurrencies, investors should prioritize sound investment principles that have worked for many years. By adopting a practical approach and seeking education and guidance from a trusted financial professional, investors can be empowered to navigate today's challenging economic landscape with confidence in pursuit of their financial wellness.

In this climate, navigating the intersection of Bidenomics and the crypto market requires careful consideration and strategic planning to safeguard financial stability. Always speak to a trusted financial advisor for the most concrete advice versus chasing a quick get-rich scheme.

______________
Ed Cofrancesco is Chief Executive Officer and President of International Assets Advisory (IAA). Founded in 1982, IAA sought to bring international exposure to retail investors, a revolutionary idea at the time. IAA’s goals is to excel as a relationship-driven, comprehensive financial services platform. Ed and his team work closely with IAA’s advisors & institutions, to offer the very best choices of products and services.