Being pro-blockchain but anti-Bitcoin has become something of a mantra for financial planners. The explosive growth of the nascent technology leaves little choice for debate — but Bitcoin has an investment, it seems, is still waiting for approval.
Recent commentary from Peter Mallouk reflects this line of thinking. The certified financial planner (CFP) and president of Creative Planning has suggested that Bitcoin is not a good buy. Instead, he suggests seeking out investments that offer payment returns.
What Investments Are Better Than Bitcoin?
Mallouk suggests that there are better investment options than Bitcoin because they offer returns while holding the investment. For example, he suggests that real estate, bonds, and stocks are all better investments because of returns. He stated:
Own real estate, where you’re collecting rent. Own stocks, where you’re collecting dividends. Own bonds, where you’re collecting yield. You don’t want to own something that’s not going to pay you.
The advice is obviously sound, but only to a certain extent. When owning any type of investment, it’s always helpful to receive something while not liquidating that asset. Returns can mitigate losses or add to gains.
However, Mallouk’s suggestion is only partially true. Investments or commodities that don’t pay dividends are not necessarily bad investments. For example, gold, diamonds, Picassos, and a Mickey Mantle rookie card can all provide excellent returns and would be considered good investments, though none pay dividends or collect rent.
The fundamental flaw in Mallouk’s thinking is a confusion regarding store-of-value (SoV). An investment like stocks or bonds can pay returns while held, but this is not the only purpose of investments. SoV investments provide hedges against inflation, governmental collapse, and company implosion — all of which have happened in recent years.
Bitcoin And Ethereum And Litecoin, Oh My!
Mallouk also suggests that the plethora of cryptocurrencies makes investing a risky proposition. In fact, he goes so far as to say that there is simply no way of knowing which will survive:
Is it possible that maybe one or two will work out in the future? Sure it is. Blockchain technology is real and you’ve got big companies like IBM and Accenture and others investing in it, that doesn’t mean that Bitcoin is going to work out or Ripple is going to work out.
The sentiment reflects the growing realization that blockchain provides a viable technological solution for companies, but Bitcoin (BTC) is just speculation. Such thinking underscores a deeper misunderstanding of the fundamental value proposition of cryptocurrencies.
Bitcoin provides a methodology for value transfer that removes the need for centralized institutions. This utility globalizes finance in a way that is just beginning to be understood. While Mallouk may not yet understand this root functionality, the fact that other companies are jumping on board simply illustrates its veracity.
Do you think Bitcoin is a good investment or is Peter Mallouk right in steering investors away? Let us know in the comments below!