There’s been plenty of spilled ink on the subject of bitcoin theft. The largest hack was the $460 million disaster at the Mt. Gox exchange in 2014. A few months ago, Bitfinex was taken for about $60 million.
It’s important to note that bitcoin and the blockchain that supports it have never been hacked; it’s companies that offer bitcoins that are at risk. Choosing one is like picking the bank with the best security.
Most experts suggest opting for exchanges with the biggest volume, the smallest transaction fees and the closest proximity to the user (e.g., a U.S.-based exchange may be better for a domestic client).
Advisors, typically conservative adopters of new technology, might be hesitant to use digital currency at all, and would want to see how using digital currency or investing in it could provide benefits to clients. The table below provides an example of bitcoin’s non-correlation with other asset classes. Britain’s surprise decision to exit the European Union this summer provides a timely, albeit limited, example.
During the first two days following the announcement, the S&P 500 Index dropped 5.5%, while British stocks (as measured by the iShares U.K. ETF, EWU) fell over 15%. The three-year old Bitcoin Investment Trust (GBTC) ETF rallied almost 20% during the same period, outshining other alternatives, including gold and managed futures.
However, in explaining the 200% return for the trust over the last 12 months, Michael Sonnenshein, director of sales and business development for Genesis Global Trading, the distributor of GBTC, prudently said that “obviously, past performance is no guarantee of future results.”