How to add cryptocurrency to your portfolio

Cryptocurrency does not feature in our strategic portfolio, partly because we are not yet converts to the idea of crypto as a fundamental asset. There’s an obvious appeal to the idea of a currency that lies outside government control. Yet the two biggest cryptocurrencies – bitcoin and ether – have significant disadvantages for transactions compared with existing payment networks. The need for a stable store of value is obvious given the growing long-term risks of currencies being debased. Yet gold still seems a superior choice in almost all ways. All this makes it difficult to decide whether cryptocurrency is truly a revolution that will find more and more mainstream applications, or the ultimate expression of our bubble-prone era.

Still, we certainly cannot not dismiss the way that bitcoin has soared over the past decade. Yes, much of this took place against a backdrop of ultra-low interest rates, which created many bubbles. More recently, the pro-crypto stance of the Trump administration gave it a further boost for equally speculative reasons. To the extent that US government has a coherent policy, it is to encourage stablecoins – digital currencies backed by assets such as government bonds – in an attempt to entrench the dominance of the dollar and provide a steady source of demand for the vast amount of US Treasuries it is issuing. (This is very different to supporting bitcoin and ether.)