Bitcoin and other cryptocurrencies are a highly speculative asset that could go either way. Warren Buffett isn’t a fan of Bitcoin, and he probably never will be. While I’d personally never touch any cryptocurrency with a barge pole, I think there’s money to be made by strong-stomached traders.
If you’re a young investor with disposable income and are keen on playing the game of greater fools (that’s based on the greater fool theory, which has nothing to do with us here at the Motley Fool!), there are steps (setting up your wallet) you’ll have to jump over before you’re officially a crypto investor. To some, such steps aren’t worth the time or effort of getting aboard the cryptocurrency bandwagon.
Fortunately, there are now far easier ways for Canadians to expose themselves to Bitcoin without having to buy the actual cryptocurrency itself. Enter 3iQ’s The Bitcoin Fund (TSX: QBTC), a security that tracks the price of Bitcoin, allowing Canadians a more convenient way to expose themselves to the speculative cryptocurrency and its wild moves.
A better way for Canadians to bet on Bitcoin
It’s never been this easy for Canadian investors to inject some cryptocurrency exposure into their portfolios. But just because it’s quick and convenient to scoop up some shares of The Bitcoin Fund for your portfolio doesn’t mean you should.
You see, Bitcoin has an extremely limited track record. As such, I don’t think there’s enough evidence to conclude that the asset is a suitable replacement for gold. Heck, I’m not so sure that any cryptocurrency has a place in your portfolio, given its propensity to trade like a stock during vicious market crashes.
While Bitcoin may be viewed as an intriguing next-generation portfolio diversifier for some, I’d urge investors to be mindful of the downside risks. Bitcoin could easily get cut in half twice from current levels. So, if you’re feeling sick at the thought of having your cryptocurrency investment lose 75% of its value over the near term, it may be wise to steer clear of cryptocurrencies or any instruments that expose you to Bitcoin, no matter how easy or convenient.
Next stop: US$50,000?
Fellow Fool contributor Chris MacDonald seems to think that the cryptocurrency could be headed to US$50,000 over the near term, going as far as saying that the “sky is the limit.” Given the increased appetite for speculative investments, count me as unsurprised if MacDonald’s Bitcoin price target is surpassed over the coming weeks and months.
At the time of writing, Bitcoin prices are fluctuating wildly between US$30,000 and US$35,000. With U.S. Treasury Secretary and former Fed chair Janet Yellen opening up the door to a future cryptocurrency “curtailment,” though, there’s also no telling how low Bitcoin can go before its next leg up. Cryptocurrencies have seen more than their fair share of massive plunges over the years, making them untouchable for those who are strangers to volatility.
It’s tough to beat The Bitcoin Fund!
If you’re a fearless investor and are keen on gaining cryptocurrency exposure after Bitcoin’s recent pullback, though, I have no problems recommending shares of The Bitcoin Fund. Just please, be aware of the risks and don’t bet the farm!
