In using the bitcoin platform, there are different economic activities that take place. From sending and receiving payment to other online transactions, bitcoin has a lot of use and functions. With lower transaction fees and the efficiency that it brings to online users, many say that in the long term bitcoin will prevail.
With the growing popularity of bitcoins that are now even used by companies for their transactions and even in paying their employees, bitcoins can also boost portfolios. In the recent report released by the Financial Planning Association, investors say that there are a lot of opportunities with bitcoins. FPA is based in Denver, Colorado and has chapters in 30 countries all over the world. The group has about 24,000 members. For one, it is viewed as a beneficial addition to portfolios of investors.
In the study, researchers compared the efficiency of bitcoin markets vis-à-vis other asset indexes. Based on the findings of the study, it was found out that bitcoins can be highly profitable in the sense it investors can invest in digital currency and very fact that different trading activities take place using bitcoins.
As what FPA noted in, trading using virtual currency is now readily available and accessible not just for companies and individuals but even to investors. With the new IRS tax guidance, concerns regarding taxation have been lessened. Backed by empirical data, one can arrive at the conclusion that investors can definitely find bitcoins a lucrative investment and can further boost their portfolio.
Potential Risks
But just like any other investments, bitcoins also pose certain risks. In the study, fiat currencies along with assets like stocks, bonds, gold, etc. are compared. Results suggested that when it comes to financial planning, bitcoin may pose a risky opportunity. For instance, there is a low correlation when it comes to performance of other assets. Other asset classes also did not have any impact on bitcoin prices.
But from a different perspective, bitcoins can diversify one’s portfolio. In fact, findings go to show that it can increase the efficiency of an investor’s portfolio.
To sum it up, FPA is clear in its position that they are not totally saying that bitcoin is highly risky but it also do not directly endorse bitcoin as a top choice for investment. What the report shows is that digital currency can diversify and can be beneficial to investors if handled the right way.
Limiting Digital Currency Holdings
Bitcoins have a lot of benefits and many view it as a very lucrative source of investment. Yet, FPA said that those who are seriously considering in investing bitcoins should take into consideration several factors and that they should take it seriously. As what the FPA noted, financial planners should give also focus on the risks involves in investing in these kinds of assets and that it should just be a minor part of a diversified portfolio. Along with this recommendation, investors also have to be careful as to how they buy their bitcoins.
Image courtesy of the FPA