SCOTT OLSON: Cryptocurrencies, or ‘Digital Currencies,’ are Nothing But an Idea, or ‘Air’

'Bitcoin' is one of over 1,110 Cryptocurrencies

Almost daily, clients, friends, even strangers ask what I think about Bitcoin. First, Bitcoin isn’t really a coin.  It looks like a coin but it is symbolic. Under the “coin” label is a code. 

Like bearer-bonds Bitcoins can be used by anyone who may acquire, steal or hack them.  In most cases, the investor never has possession of these coins, if any are really produced.

What is Bitcoin?

“Bitcoin” is just one of over 1,110 “Cryptocurrencies.” Bitcoin just happens to be one of the largest (this week), but then, when all the cryptocurrencies started no-one knew Bitcoin would be the one.  Investors would have been just plain lucky! Very lucky!  Cryptocurrencies, or “Digital Currencies” are nothing but an idea, or “Air.”

Sellers of cryptocurrencies want you to believe that your investments, your currency, your bonds are all “NO GOOD” and that cryptocurrencies are safe!  Unlike stocks, bonds, variable annuities and mutual funds that are backed by stock ownership of hundred billion dollar companies, Bitcoin and all cryptocurrencies are nothing more than “Air.”

Is Bitcoin, and the other 1,230 cryptocurrencies safe?

With digital currencies, you have no idea who you are giving your money to, in exchange for “Air.”  A huge potential risk is in opening an account in Bitcoin, or others, in another country that does not have the anti-fraud laws we have.  Have you heard of “Identity Theft?  I know a few investor’s who have had their identities stolen.  Losing their identity cost far more than some little investment loss.

Actually, cryptocurrencies may be in use primarily on the “Dark-Web” for local and global drug deals, prostitution, gun running, political bribery, sex-slavery and every other illicit trade.

Youbit, a South Korean bitcoin exchange filed for bankruptcy after being hacked and investors money stolen, the second time this year.  Hackers stole close to 17% of investors’ holdings on Tuesday.  In April, hackers stole about $35 million in digital currencies.  Last year, Hong Kong-based exchange Bitfinex was briefly shut down after hackers stole more than $65 million in bitcoins.

Then, there is the inherent risk of a BUBBLE.  You may have heard about the Tulip Bulb Bubble?  In Holland during the early 1600s speculation drove the value of tulip bulbs to extremes. At the height of the market, the rarest tulip bulbs traded for as much as six times the average person’s annual salary.

In 2017 Bitcoin gained 1,987% (almost 20-fold profit, to Sunday, Dec 17).  Bitcoin has gained a whopping 1,650 times its $12 price in 2012, but many others have gone bankrupt.  Don’t believe Bitcoin will be here years from now either. Bitcoin charts

This week not so well.

How would you like to be the investor who couldn’t take the stress of not owning Bitcoin, so you bought it Sunday morning at 7 a.m. for $19,795.  By 9 a.m. your Bitcoin was down 41% to $11,589 –in just four days!  Merry Christmas!

Is it too late to invest?

The real question is WHICH BITCOIN Wins?  Even though you could have thrown your good money into the wind and bought Bitcoin years ago and made a fortune.  Even Bernie Madoff, and the largest local Ponzie Scheme in Brevard County history; the Donald Babb/Ralph Ruth Ponzie Scheme made investor money for a while.

Stock markets are at least two to three time too high, Bitcoin and the likes could continue higher – for a while.  Sooner or later the Bubble will burst on both, despite all the great work of President Trump.

For more information or FREE portfolio RISK ANALYSIS, contact Scott L. Olson, President, Atlantic Financial Advisors, LLC, Fiduciary & Registered Investment Advisor at 321-751-5599 or email  Scott@AtlanticFinancialAdvisors.com. Atlantic Financial Advisors is located at 3682 North Wickham Rd, Suite C, in Melbourne, Florida.

ABOUT THE AUTHOR

With 38 years experience in Financial and Estate-Planning, Wealth Preservation and Wealth Transfer, Scott Olson provides required Continuing Education courses to Attorneys, and CPAs in Florida. 

His expertise includes the “Substantially Discounted Roth-Conversion” and the Annuity Arbitrage, tax-favored income and estate-tax reduction wealth transfer techniques.  He presented the “Substantially Discounted Roth-Conversion” at the Florida Bar Tax-Section, October 2014 conference, and their 1-hour CLE teleconference in March 2015.

All investing is subject to risk, including possible loss of principal.  Advisory Services through Atlantic Financial Advisors, LLC (AFA), Registered Investment Advisor. Securities and additional Advisory services offered through Independent Financial Group, LLC (IFG).  Member FINRA/SIPC Ÿ AFA and IFG are not affiliated. OSJ Branch: 12671 High Bluff Dr, Ste 200, San Diego, CA 92130.

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