- In an exclusive interview with Business Insider, Kate Warne - an investment strategist at Edward Jones, which oversees more than $1 trillion - says to "never be a long term investor" in the cryptocurrency space.
- She also criticizes the fervent speculation and excitement behind the asset class, attributing price movements to irrational investor behavior.
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Kenny Rogers famously wrote "you've got to know when to hold 'em, when to fold 'em, know when to walk away, and know when to run."
And although Rogers was most definitely not referring to investing in his famous tune, the applicability of his words to money-management is uncanny.
But history tells us that investors can rarely make sound decisions in the heat of the moment. Every so often, an asset comes along that they can't help but pour money into. In recent years, ever-controversial bitcoin has been one such investment.
Kate Warne - an investment strategist at Edward Jones, a firm overseeing more than $1 trillion - thinks investors are setting themselves up for disaster in cryptocurrencies. Her comments come on the heels of the more than 300% rally bitcoin has seen since hitting a 17-month low in December - one that might have investors licking their chops at the prospect of easy gains.
And Warne is not coy in her assessment of the space.
"We don't like the specifics of bitcoin, and we really think the price is moving around on speculation, rather than something else," she told Business Insider in a recent interview. "When you think about bitcoin, you're looking to buy something that you hope to sell for more to somebody else who's more excited than you are. That's the essence of speculation."
Warne's comparison sounds awfully familiar to the greater fool theory, which is based upon the notion that investors will purchase egregiously valued securities - regardless of quality - under the assumption that they'll be able to sell them to a "greater fool" for a higher price. If this sounds familiar, it's because this phenomenon has played a role in every major asset bubble in history.
For this reason, she thinks investors should keep cryptos as far away from their portfolios as possible.
"We would not advise including them," Warne said. "We would not advise investing in them, or speculating in them."
She added: "If it goes up, sell it. If it goes down, sell it. But get out quick."
The wild price swings, insecure exchanges, and plethora of well-renowned experts that have disavowed cryptocurrencies has helped push the price of bitcoin roughly 50% lower than its record high. That includes Jamie Dimon - who called it a "fraud" back in 2017 - and Warren Buffett, who's likened it to a "gambling device."
Also, at this time, the asset's ability to serve as a means of exchange is clearly limited. Due to it's potential for theft, lack of acceptance, and tax issues, those who actually intend to use bitcoin as a currency are finding themselves in an increasingly difficult enviroment.
Time will tell if cryptocurrencies will eventually play an integral role in a balanced, diversified portfolio. For now, it's safe to say that Warne will continue to advise of their danger.
