There is no doubt that cryptocurrencies have major potential benefits to businesses and end users, but it’s important to understand that as with all game-changing technologies, there are significant risks and a myriad of threats which could prevent these currencies from reaching their true potential.
Just as a casino has no regulation and is wildly unpredictable, so too are cryptocurrencies! You’re ultimately spinning a roulette wheel and hoping for red or black.
While our advice would be to stick to asset-backed investments, if a client is really keen on jumping aboard the crypto bandwagon, we suggest investing a small amount and treat it as the highest risk part of your portfolio. The volatility involved with trading cryptocurrencies enables you to make huge gains or suffer high losses in very short timeframes. By all means, have some fun with it – and have the knowledge that you were involved in the early stages of the technology – but maintain your stable, asset-backed and income-focused investments as the mainstay and core of your portfolio.
The fact is, the trading of cryptocurrencies are generating a huge amount of interest because of the substantial investment gains that early adopters have achieved. Have you missed the boat if you’re not already on board? Not necessarily. But proceed with caution.
Central bankers almost certainly see cryptocurrencies as a threat rather than an opportunity because they rely on the ability to control the supply and availability of money in order to stabilise their economies and combat risks such as inflation. Despite this, it is likely that cryptocurrencies will become more mainstream, and many businesses have signalled their intent to accept these forms of payments in the short to medium term.
Here at Berkeley Assets we believe the prices should stabilise as the market matures and regulation could legitimise the technology, allowing people to gain more confidence in the true value of the currencies. It must always be remembered, however, that governments can and may block the use of cryptocurrencies or make it more difficult for the technology to be accepted in the mainstream.
Ultimately, at Berkeley our business is strongly focused on asset-backed investments, which have quantifiable yields and a low risk strategy; you could say our approach is the exact opposite to the value of cryptocurrencies.
But the options of where to invest – crypto or private equity – are two entirely different things, apples and oranges. While private equity generates consistent, long-term growth, with the security of asset-backed businesses and researchable, predictable trends, for some, there is no better rush, adrenaline or excitement than spinning a wheel and hoping for the best.