Financial Planning & Wealth Management

Bitcoin

For years, clients have asked me about Bitcoin and cryptocurrencies. My response is always the same – under FAIS legislation, I am not licensed to give advice on this asset class. I can only give advice for products which I am licensed for. Obtaining these licenses is no small task. It involves specialized education, hands-on product experience, supervised training, and meeting stringent regulatory requirements.

 

I have not met any of these standards for bitcoin. With that disclaimer, let’s address the elephant in the room: Bitcoin’s price is nearing $100,000, or roughly R1.8 million.

There are many factors driving Bitcoin’s recent performance, none of which I fully understand. Skeptics often argue its price is fueled by the greater fool principle—the idea that people buy overvalued assets hoping to sell them later to a “greater fool.” It’s an easy way to dismiss Bitcoin, especially if you don’t own any.

 

And yet, there are a heck of a lot of very rich ‘great fools’ out there. It doesn’t seem so foolish now. Credit where it’s due—no other asset class that I am aware of has given you bitcoins returns this past decade.

 

Rather than debating its utility or potential, let’s examine Bitcoin from an investment perspective—specifically in the context of building a portfolio that supports retirement income over 30 years.

 

The China and Tech Stock Parallel

 

Bitcoin’s meteoric rise reminds me of the hype around investing in China’s stock market in 2014. Back then, China’s booming population and rapid economic growth of nearly 10% annually seemed to validate its market’s impressive 16% yearly returns. But between 2021 and 2023, China’s market lost 40%, erasing 7 years of growth in just two years.

Now, imagine basing your retirement plan on an investment like that. You think you’ve saved enough to retire, start making plans, and then the market halves within a couple of years. Suddenly, retirement is no longer an option.

 

We see similar patterns in technology stocks. Companies like Facebook, Google, and Amazon have experienced sharp drawdowns—up to 75% in just months. While these asset classes deliver incredible growth, they’re also highly volatile. Facebook, for example, saw its share price drop 75% in 2021.

Bitcoin’s price movements are even more volatile than China’s market or tech stocks combined. Over the past decade, Bitcoin’s price history tells a story of breathtaking highs followed by severe, sudden declines.

The Importance of Long-Term Data

 

Here’s the core issue with Bitcoin and similar high-risk assets: we only have around 20 years of data on them. That’s simply not enough to confidently include them as a major component of a long-term income generating retirement portfolio.

 

We know that crypto prices can halve in a matter of months, making them highly unpredictable. By contrast, traditional industries—such as retail, industrials, financials, healthcare, and utilities—offer over a century of data. This allows us to model downturns, forecast outcomes, and design portfolios that weather recessions while delivering stable, reliable income.

 

Bitcoin and tech stocks lack that depth of data. What we do know is that they’re prone to sudden and severe drawdowns, sometimes as much as 75% in just months. That kind of unpredictability is the opposite of what we want when you are a couple years out from retirement (or in retirement), where predictability and stability are critical.

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About

 MattFin is a blog that focuses on wealth management, investments, financial markets and investor psychology. I build financial plans and portfolios for families and individuals

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