New Bitcoin ETFs Recently Hit the Market — Are They Worth Buying? – Presented by Mark K. Lund, Financial Advisor in Utah

Financial Advisor Utah

The new Bitcoin ETFs (Exchange Traded Funds) now make it possible to get exposure to the cryptocurrency by proxy through funds that are traded like stocks on various US Stock Exchanges. Previously, if you wanted to buy and sell Bitcoin, you had to do it through one of the cryptocurrency exchanges.

But just because Bitcoin is now easier to own (no need for a complicated digital wallet or risk of losing the drive where your cryptocurrency is stored), and the related ETFs are being managed by large Wall Street firms, does it make any sense to invest in this “currency”?

First of all, a quick reminder of what it is. Bitcoin was created about 15 years ago as a virtual currency that wouldn’t be backed by any bank and could be used to make small payments.1

Individual Bitcoins are created through a process called mining, where a user’s computer goes through a processor-intensive process to validate previous transactions. Each Bitcoin transaction is recorded in a distributed, public ledger, where the parties involved are kept anonymous. There is a finite number of Bitcoins that can be mined, which in theory should keep their value rising.

Because it’s not tied to a fiat (national) currency, Bitcoin has been touted as a safe harbor in times of crisis. And because you can own and exchange Bitcoin anonymously, it supposedly offers protection from government interference in free trade, such as taxes and tariffs.

Unfortunately for Bitcoin owners, none of these purported benefits have materialized in the real world. Rather than being an asset that maintains its value despite economic turmoil, the price of Bitcoin has proved to be extremely volatile.2 And people hoping to avoid detection by law enforcement, among them criminals, have found that its anonymity is not water-tight.

According to the Wall Street Journal, the pitch being made for newly-approved Bitcoin ETFs is that they will miraculously work like digital gold, holding their value in a crisis. But there’s zero evidence this will be the case.

James Mackintosh writes, “In both bank runs of March 2023 and the pandemic panic of March 2020, Bitcoin proved to be digital fool’s gold, plunging at the first sign of trouble.” From its February 2020 high to the low a month later it lost half its value, while the S&P 500 lost a third. “Far from being a store of value,” adds Mackintosh, “Bitcoin’s been a store of volatility.”

And it is likely that the new ETFs are going to make this instability worse because they will bring in more speculators to what’s already mostly a speculative asset.

While Bitcoin ETFs will surely continue to garner headlines and draw in investors motivated by a fear of missing out, it does not look like this new-found financial instrument for speculating in the cryptocurrency will be a good choice for someone looking to grow their portfolio over the long-term.

Unlike stocks, bonds, and funds comprising them, Bitcoin does not derive its perceived value from profits, dividends and/or interest. It holds no intrinsic value outside demand from short-term speculators. It appears to be mostly a clever currency solution looking for a problem to solve.

If you ever have any questions about your investments or retirement plans, please feel free to give me a call at 801-545-0696.

Regards,
Mark Lund
Stonecreek Wealth Advisors, Inc.
11576 S State Street, Bldg. 1002
Draper, UT 84020

Sources:
1. http://go.pardot.com/e/91522/news-how-Bitcoin-works-/94hrct/2186646492/h/oc0RwQo54eRIa1VlpVY-BXH2c3tq5WmONsuHW15JDSw
2. http://go.pardot.com/e/91522/s-problems-even-worse-f48256d2/94hrd1/2186646492/h/oc0RwQo54eRIa1VlpVY-BXH2c3tq5WmONsuHW15JDSw

Disclosure:This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This material was prepared by Efficient Advisors, LLC (“EA’) for Mark Lund, Mark is a Financial Advisor in Utah. He is known as a Wealth Advisor, The 401k Advisor, Investor Coach, Financial Planner, Investment Advisor and author of The Effective Investor. Mark offers investment advisory services through Stonecreek Wealth Advisors, Inc. a fiduciary, independent, fee-only, Registered Investment Advisor firm providing investment management and retirement planning for individuals and 401k consulting for small businesses. Mark’s newsletter is called The Effective Investor Newsletter. Cities served in Utah are: Salt Lake City, Salt Lake County, Utah County, Park City, Murray City, West Jordan City, Sandy City, Draper City, South Jordan City, Provo City, Orem City, Lehi City, Highland City, Alpine City, American Fork City. The views expressed herein are exclusively those of Efficient Advisors, LLC (‘EA’), and are not meant as investment advice and are subject to change. All charts and graphs are presented for informational and analytical purposes only. No chart or graph is intended to be used as a guide to investing. EA portfolios may contain specific securities that have been mentioned herein. EA makes no claim as to the suitability of these securities. Past performance is not a guarantee of future performance. Information contained herein is derived from sources we believe to be reliable, however, we do not represent that this information is complete or accurate and it should not be relied upon as such. All opinions expressed herein are subject to change without notice. This information is prepared for general information only. It does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. You should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. You should note that security values may fluctuate and that each security’s price or value may rise or fall. Accordingly, investors may receive back less than originally invested. Investing in any security involves certain systematic risks including, but not limited to, market risk, interest-rate risk, inflation risk, and event risk. These risks are in addition to any unsystematic risks associated with particular investment styles or strategies.

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About the Author ()

Mark K. Lund is the author of The Effective Investor, a #1 Best Seller, and founder of Stonecreek Wealth Advisors, Inc. an independent, fee-only, Registered Investment Advisory firm. He has provided articles for or been quoted in: The Wall Street Journal, The Salt Lake Tribune, The Enterprise Newspaper, The Utah Business Connect Magazine, US News & World Report, and Newsmax.com, just to name a few.  Mark publishes two newsletters called, “The Mark Lund Growth Report” and “Mark Lund on Money.”  Mark provides CPE (continuing professional education) courses for CPAs.  You may also have seen him on KUTV Channel 2, or as a guest speaker at a local association or business. Mark provides investment and retirement planning services for individuals and 401(k) consulting for small businesses. In his book, The Effective Investor, Mark exposes the false narrative magazines, media, big Wall Street firms, and most advisors want you to believe. The good news is that Mark will show you that you don’t need their speculative ways of investing in order to be a successful investor. Get a free copy when you schedule your initial consultation.

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