Are Cryptocurrencies a Good Investment?

Abstract

This article identifies the many risk factors an investor should consider before adding cryptocurrencies to their investment portfolio. The returns yielded by these digital assets can in some cases be high, but an investor should seek to understand what risks exist as well. There are numerous factors to consider when investing in any asset. Traditional assets may prompt a fundamental analysis of an industry, company (business plan, financials, leadership) and other considerations. However, cryptocurrencies are not traditional assets. This investment/speculative environment contains: extremely volatile assets, a largely unregulated crowd funding mechanism, chronic theft and loss, money laundering, high transaction processing latency, potential market manipulation, and an overhanging ethical question. This article is not meant as investment advice, but points to many risk factors that are not generally present when investing in traditional assets/companies, and highlights the fact that the data needed to perform due diligence is often lacking.

TOPICS: Currency, portfolio construction, wealth management