Market Minute - December 13, 2017
by Scott Rosenquist, CFA
Cryptocurrency has been a hot topic in the financial press this year and even hotter with investors. Bitcoin is just one of the several cryptocurrencies that are now receiving interest from everyone; professional investment managers to grandmothers. Bitcoin, the most popular of the cryptocurrencies has soared in value this year as more and more people are becoming interested in the digital currency.
On the same hand, it has had strong losses too. We have fielded several questions about this newfangled investment and provide the following details for informational purposes only. Vantage does not recommend this type of speculative investment due to the high volatility and lack of backing by governments and institutions.
What is bitcoin? It is a digital currency that is not issued or backed by a government or financial institution. Bitcoins are created by “mining” using high powered computers. This process involves verifying bitcoin transactions on a public ledger across a network of computers. The reward for completing the verification or puzzle is bitcoin. Only a limited amount of bitcoin can be created as of now, which is part of the appeal of the digital currency. It also allows anonymous transactions across the globe which could lead to questions on money laundering and other illegal activities.
The foundation of these cryptocurrencies is a technology called blockchain that essentially removes an intermediary from the transaction. In short, blockchain is a decentralized ledger system across a network of computers and does not involve a financial institution or government. The potential implications of blockchain can be enormous for several industries and notably the banking industry. Several large companies are reviewing blockchain technology for its uses including IBM, Microsoft, and most major financial companies.
By the end of this year, both the Chicago Board Option Exchange and the CME Group plan to offer futures contracts on Bitcoin. This is a significant development and could attract institutional investors to this new digital currency. It will be interesting to see how these new products take hold in the marketplace and how they will be used by investors. Additional information can be found by clicking here.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendation for any individual. Cryptocurrencies are highly speculative and volatile and are not recommended by Vantage for investment. There is a high probability of investment loss associated with speculative investments. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All data and information is gathered from accurate sources but is not warranted to be correct, complete or accurate. All investments carry a certain degree of risk including the possible loss of principal and there is no assurance that an investment will provide positive performance over any period of time.
The information, opinions and forecasts expressed in the referenced links are presented from unassociated parties and do not necessarily reflect the opinions of Vantage Financial Partners Limited.