Cryptocurrencies are seeing increasing popularity in South Africa and at one point Google searches for the term ‘Bitcoin’ topped every other country in the world. However, the jury is still out when it comes to digital coins as a means for investment.
That is according to a survey conducted by PSG Wealth and Survey Monkey in the fourth quarter of 2017. Cryptocurrencies have since endured a roller-coaster ride, with Bitcoin as an example falling just short of $20,000 in mid December, before falling all the way back down below $6,000 earlier this week after the World Bank chief described the cryptocurrency as a bubble and Ponzi scheme.
PSG Wealth noted that major critics of the cryptocurrency boom have been, among others, famous investors like Warren Buffet and Howard Marks. While institutional investors have been the harshest critics of these new digital coins as too speculative to warrant the risk, many small investors and hedge funds continue to take a gamble on their returns.
According to Credit Suisse’s Global Markets Research Department, the value of Bitcoin has been three times as volatile as the price of oil and 11 times more than the post-Brexit exchange rate between the US dollar and the British pound.
PSG Wealth said it noticed the increased hype surrounding Bitcoin, due not only to the fascinating background of this currency, but also the massive return numbers which are widely reported in mainstream media. As such the group distributed its own stance on digital coins in September last year, highlighting its risks.
PSG Wealth said it would be more comfortable to consider Bitcoin, in some shape or form:
- When credible research and regulatory oversight is common place
- When wealth managers can be appropriately licensed and accredited
- When a central authority takes responsibility for ongoing oversight
- When illegal activity via Bitcoin can be traced back to specific accountable parties
- When the infrastructure is stable enough to administer larger volumes
The results from the wealth manager’s survey revealed the following: More than 32% of respondents felt that cryptocurrencies were speculative, but that they were willing to take the risk.
Nearly the same number of respondents (30.11%) said that it was too speculative for them. Most of the reasons supplied were that respondents felt they don’t understand cryptocurrencies to make an informed investment decision. Others likened it to a Ponzi scheme, while others felt the underlying technology held more value than the actual coins.
“While the investment battle rages on around those willing to bet on the volatility in cryptocurrencies, the war of whether digital currencies are here to stay seems far from over. What we do know, is that it is critically important to distinguish between speculation and investing. Especially in the wealth management space,” PSG Wealth said.