Bitcoin is surging but there’s a billion reasons to reconsider crypto

The latest surge in Bitcoin, along with big players making investments in the sector, is retesting interest in the mysterious asset class. But is it for you?

Jacqui Clarke, crypto sceptic and author of Stop Worrying About Money.

Despite growing institutional adoption of cryptocurrencies by major players like AMP, Amazon, Walmart, and JP Morgan, a leading Australian investor, who represents some of the nation’s wealthiest families, won’t touch it.

Conservative chartered accountant Jacqui Clarke tells The Money Puzzle podcast she’s sceptical of Bitcoin’s fundamental value.

“Advisers, certainly in the Sydney and Melbourne markets, who look after wealth are not going near Bitcoin,” Clarke says.

“Although they may respond on request if you say, ‘that’s what I want to hold’.”

With Bitcoin rising by more than 40 per cent over the last year to nearly US$105,000, investors remain mixed on whether it’s time to place crypto alongside traditional asset classes such as gold and cash in retail portfolios.

But Ms Clarke sticks to her investment principles, suggesting gold is a genuine investment class. She argues there are some basic investment principles investors should stick to.

“My caution to people always is doing your due diligence on the investments. So don’t invest in something you don’t understand,” she says.

“(For me) It is also very difficult to get to the bottom of what Bitcoin actually represents.”

Certainly, the tide is turning, even as advisers remain unsure or uninformed about the new asset class, which has been flying high.

The so-called digital gold had one of its strongest spells in recent months thanks to the wholehearted backing of the Trump administration in the US, where crypto could soon be part of a US strategic reserve.

In Australia, two key developments have stoked FOMO (Fear Of Missing Out) among traditional investors.

First, new statistics from the Australian Taxation Office show that a hefty $1 billion worth of assets in Australian Self Managed Super Funds are now represented by crypto.

Second, a string of reports show ever widening ownership among Australian retail investors.

Industry surveys suggest up to one third and a half of all retail investors have some holdings in crypto. Surveys also suggest the majority of crypto holders are male and under 40 years of age.

However, the holdings verified by the ATO for SMSFs would suggest more older investors are engaged in crypto than previously assumed.

The issues for Clarke and many other professionals in the investment market is the lack of transparency and security in crypto.

She remains puzzled on the intrinsic value of all crypto assets and highly sceptical over the risk of investors losing money in the less regulated end of the market.

Clarke, who is also a non-executive director at BKI Investment, a company with links to the billionaire Millner family asks: “What kind of treasury or monetary asset is it? It’s not like we have a deposit in the bank.”

“And the worst thing about it, for us mere individual investors, is if we lose the data, we can lose the Bitcoin, if you store your data off site and you lose that … it’s gone,” she says.

“So there’s risks like that which people may not be considering. Moreover, the investor Warren Buffett has famously said he’s never going near Bitcoin and he continues to support that view.”

The ATO has warned investors to check platforms are a registered business or licensed by a relevant authority.

“Look for independent reviews and user feedback, ensure the site uses secure connections and understand their policies (for example, refunds, dispute resolution),” the ATO says.