Summer 2024 is rapidly becoming the summer of Bitcoin. The cryptocurrency's performance has been as scorching as the weather, up almost 15 percent in the past month and just $4,400 below its March record high of almost $74,000.
In the last week alone, Bitcoin and its ETF surrogates surged almost 7 percent after former President Donald Trump promised at a weekend conference to make the US the “crypto capital of the planet and the Bitcoin superpower” if he wins the election in November.
This summer’s Bitcoin bonanza comes after a price deceleration following a powerful start to the year. Bitcoin is up nearly 58 percent year-to-date, leaving financial advisors wondering if this is the start of a new leg up for the cryptocurrency or if it is in the process of overheating.
“At this point, we do not feel comfortable recommending it to clients as part of their portfolios, it is still too uncertain for my liking,” said Charles Failla, CEO of Sovereign Financial Group. “So, regardless of Bitcoin approaching a record high or not, we not yet buyers."
That said, for clients that have shown an interest, Failla is advising them to allocate no more than 2 to 4 percent of their overall holdings to Bitcoin.
Ryan Bond, wealth manager at Savvy Advisors, is also not recommending Bitcoin to clients at its current level. Aside from long-term worries about its volatility and regulatory uncertainty, Bond simply says he would wait for a better entry point if he were a buyer.
“While approaching an all-time high can mean strong investor sentiment, it’s always a good idea to follow the age-old adage of buying low and selling high. Investing now would be considered buying high, so be prepared for significant volatility on your principal investment,” said Bond.
Meanwhile, Damon Polistina, director of research at Eaglebrook, is taking a long-term approach, viewing bitcoin as a generational, long-term investment. He recommends buying and holding Bitcoin for the long term, despite its current hot streak.
“It isn't easy to time a Bitcoin entry point, but we think that the long-term positive catalysts far outweigh the near-term headwinds,” said Polistina.
The recent bitcoin conference, particularly Donald Trump's announcement to hold and purchase bitcoin in a strategic reserve, serves as a testament to Bitcoin's changing narrative in Polistina’s opinion. The stark contrast between the average political view of Bitcoin four years ago and today “cannot be overstated” in his view.
“There has been a complete 180 from politicians on Bitcoin,” said Polistina. “Politicians used to say that Bitcoin was a tool for criminals, but now, they promote its strategic importance to the United States. The speed at which this shift has occurred is almost incomprehensible.”
Likewise, Alex Pron, founder and wealth strategist at Crossover Capital Advisors, would be a buyer at these levels and particularly for clients with a five-year time horizon. Pron believes the liquidity cycle is breaking out and the government is beginning to print more money. And he sees growth in the money supply by Central Banks around the globe as being correlated with very strong Bitcoin price performance.
Furthermore, Pron appreciates the fact that Bitcoin is increasingly being adopted by state pensions like Michigan and Wisconsin, as well as major financial institutions.
Finally, he says it is bullish when two presidential candidates advocate for a US strategic bitcoin reserve.
“How long before the US government is an active buyer of an asset with a very limited supply? This represents a positive development and may drive the price significantly higher,” said Pron.
By listening for what truly matters and where clients want to make a difference, advisors can avoid politics and help build more personal strategies.
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