Approach cryptocurrencies with caution

MUSCAT, JAN 28 – Global financial planning firm Guardian Wealth Management is advising investors in the region to remain cautious about bitcoin and other cryptocurrencies as the digital market falters. In the past month the value of Bitcoin has fallen by 50 per cent, while other cryptocurrencies such as Longfin are down around 10-15 per cent. This drop in value comes as countries around the world take a firmer stance against trading in cryptocurrencies, with South Korea introducing a ban on anonymous crypto-trading and India suspending the accounts of cryptocurrency investors.
“It’s no secret that cryptocurrencies are a very volatile market but with countries such as China and India making statement moves and even fining some investments on tax evasion, it is causing the entire industry to re-evaluate,” said Elliott Parkhouse (pictured), Senior Financial Planner at Guardian Wealth Management.
“As a financial advisor, investing in cryptocurrencies is not something we recommend to our clients because, at the moment, it is an unregulated market and clients can lose money as quickly as they make money.”
Earlier this month Bitcoin traded at below $10,000 down from its December high of $20,000, with experts issuing fresh warnings about the volatility of the currency and the possibility of yet more crashes to come.
The popularity of Bitcoin and fluctuations in its stability has led to rumours that new and stringent regulations are due to be announced by central banks at the next G20 summit, to be held in March.
If implemented these new rules could, in theory, make for a more secure future for cryptocurrencies. However, what impact any new regulations would have on the value and appeal of Bitcoin and cryptocurrency as a whole remains to be seen.
“Cryptocurrencies and the underlying blockchain technology definitely have a future in modern society and are extremely useful for the exchange of information and goods, however until the market is regulated they should be approached with caution,” said Parkhouse.
Investing in Bitcoin and other cryptocurrencies at this moment remains too much of a risk and not an investment Guardian Wealth Management would recommend to its customers, added Parkhouse.
“Putting money in is a gamble. If it does well you could double or treble your income, but just as easily if it goes badly you could lose everything. Without knowing the facts, past performance is no indication of future performance,” he said.
Cryptocurrencies have featured heavily in the media recently, with numerous stories about huge profits and equally large losses making headlines while adverts for digital currency trading firms have even appeared on social media, which can make for a tempting proposition for would be investors anxious not to miss out on the next big opportunity.
However, rather than being swept up in the buzz that currently surrounds the digital market, Parkhouse advises taking a more cautious approach.
“Virtual currencies such as Bitcoin aren’t the easiest thing to invest in, you need to buy them safely. So, like with anything, do your own research and make an educated decision that way. You need to understand how it works, if it is liquid, then decide what you are willing to risk.
“I would be worried about investing in a company that just popped up on your Facebook feed. If you decide to buy virtual currencies such as Bitcoin, do your research and use a legitimate seller.”