Interesting as Bitcoin is as a phenomena, Tiemann Investment Advisors does not believe that Bitcoin or any Bitcoin-related entity is ready for prime time. To learn more about how Dr. Tiemann thinks about Bitcoin, please read his Viewpoint Note “The Irony of Bitcoin.”
Nevertheless, the Bitcoin news feed remains an exciting if roiling place, perhaps not unlike the wild west, with stories of outrageous heists—such as the recent $5.1 million Bitstamp hacking incident, during which a total of $6.6m in Bitstamp funds were at risk of being stolen, although the exchange managed to rescue about a quarter of the funds in the nick of time even though the thief appeared to have access to all the addresses in Bitstamp’s hot wallet—side by side with announcements of new prospectors setting up high-flying ventures, such as the launch of the Coinbase Bitcoin Exchange, with $75 million in venture capital funding from such investors as the New York Stock Exchange, former Citigroup Inc. Chief Executive Officer Vikram Pandit, and Spanish banking giant Banco Bilbao Vizcaya Argentaria SA.
Although Coinbase is the first licensed U.S.-based Bitcoin exchange and will certainly help to legitimize the digital currency in the eyes of the public as well as the broader financial community, recent massive collapses of Bitcoin exchanges, notably that of Japan-based Mt. Gox last year, when it lost 750,000 customer bitcoins and 100,000 of its own, but was at the time was the largest Bitcoin exchange in the world, remains a stark warning about the safety and security of the digital currency. Most people agree that Bitcoin hasn’t solved its most critical security issues.
Which is why we agree with Jeff Reeves in his Opinion piece: “Bitcoin has no place in any portfolio” when he says:
So what’s the score? Should investors see the decline in bitcoin prices over the last year and the recent buzz about the digital currency as a sign of hope?
The sad reality is that while there may be a select few that are going to make money on bitcoins, the vast majority of investors should not give bitcoin the time of day.