Recently, Bitcoin, Ethereum and other cryptocurrencies have seen their values plummet following the release of the latest consumer price index. With a much higher than expected US annual inflation rate of 7.5%. This put significant downward pressure on many crypto assets.

Understanding Bitcoin

Bitcoin is a digital currency that is tricky to understand because it’s essentially just computer code. The main reason cryptocurrency has any value is because people say it does, and the people saying that are mostly the ones who have large crypto positions. Bitcoin is the biggest cryptocurrency in the world, but it’s still quite difficult to buy anything using it. In addition, its volatility makes it challenging to use as a currency and transactions fees can be significant and hard to predict.

Bitcoin is in limited supply which means that mining new Bitcoin is extremely resource intensive. In fact, Bitcoin mining now uses up more electricity than some small countries. The impact on the environment is increasingly concerning which leads to a lack of trust in cryptocurrencies in the future.

What might happen next with Bitcoin

Crypto seems increasingly more likely to be a huge bubble that’s going to eventually burst. Trading in crypto is effectively gambling; a game of chance as to whether the price will rise or fall. With traditional stocks and shares, you can make some educated guesses as to what might happen based on real information provided by the companies you are investing in. With crypto, there is no way to predict what might happen next. Those who benefit most from crypto increasing will suggest that Bitcoin could rise to $200,000 by the end of 2022. Equally, many experts are suggesting it could be the beginning of the end for this climate-unfriendly asset.

China has already banned cryptocurrency and it looks likely that Russia’s central bank may adopt the same stance. In the US, the Federal Reserve is looking at introducing its own regulated cryptocurrency. The reality is that cryptocurrency has a bad reputation – it is associated with scams and criminal activity. All of this points to governments bringing in much more regulation which will likely dampen future growth in this highly turbulent investment.

Choose less volatile assets

Given the volatility of Bitcoin and other cryptocurrencies, it would seem sensible to hold only what you can afford to lose completely and consider capping your investment to a small % of your portfolio. Safer assets such as the Nexus Global Portfolio offer lower growth but ensure that you will not be left in a position where you wish you’d never set eyes on an investment. Using a discertionary fund manager, such as Quilter Chevoit can give you confidence and security that your portoflio is being expertly handled where your financial goals, DFM research and relevant general and specific market conditions are all considered when making investment decisions. Where there is a lack of research and predicting the future with crypto, you will find the opposite when you work with Blacktower and our specially selected DFMs.

Advice from Blacktower Financial Management

A balanced portfolio across a range of asset classes enables you to take advantage of higher returns in some areas and weather the storm in others when the market is moving fast. Blacktower Financial Management wealth advisors can assess your situation, helping you to identify the best way to structure your wealth for maximum returns. We will regularly review your position to ensure that you achieve your financial goals now and in the future. Contact one of the representatives at our Lisbon office today for your free no-obligation discussion.

Blacktower in Portugal

Blacktower’s offices in Portugal can help you manage your wealth to your best advantage. For more information contact your local office.

Antonio Rosa is the Associate Director of Blacktower in Lisbon, Portugal.

Blacktower Financial Management has been providing expert, localised, wealth management advice in Portugal for the last 20 years. We can help with specialist, independent advice on securing your financial future. Get in touch with us on (+351) 214 648 220 or email us at