PortfolioMetrix head of investments Brandon Zietsman has said that investors should be cautious when buying cryptocurrency.
According to a report from the Sunday Times, Zietsman said investing in cryptocurrency will always be a gamble – and that investors should only invest the portion of their wealth they would normally allocate to their gambling habit.
“You may get it spectacularly right and retire a decade or two early, but you will, at some point, get it very, very, very spectacularly wrong,” said Zietsman.
He said that when buyers value cryptocurrencies, they should evaluate the potential economic return, scarcity, and utility of each token.
Unlike other asset classes, cryptocurrencies have no economic return and the ability to create new coins makes the supply of cryptocurrency practically unlimited, he said.
Old Mutual investment analyst Zain Wilson said cryptocurrencies are regarded as un-investible, due to their unclear definition under South African regulation.
Wilson said it is not clear whether cryptocurrencies are considered currencies or commodities, and the tax implications for any profits are difficult to predict.
RMB blockchain lead Farzam Ehsani predicted that cryptocurrency prices will increase over time, but there will be a high amount of volatility.
He said that of the hordes of initiatives attempting to raise capital through initial coin offerings, many “will end in tears”.
The price of Bitcoin is affected heavily by the imposing of regulation, and the value of the coin recently plummeted following another wave of regulation concerns.
Certain countries have opted to embrace cryptocurrencies as a means of exchange, however, with Germany recognising digital currency as an equivalent to legal tender for tax purposes.