The crypto craze is prompting many to try their hand to make money. JUNO KiwiSaver Scheme CEO and Founder Mike Taylor explains why JUNO doesn’t invest in cryptocurrency.
The hype around cryptocurrency has risen significantly in the past 12 months, capturing the attention of many Kiwis. I get asked regularly what my views are on Bitcoin and other cryptos, and if you should invest in them. JUNO does not invest in any cryptocurrency. Here’s why.
1. Our strength is growth companies and businesses
JUNO has actively managed funds, and our fund managers are specialised in picking high-growth quality companies and businesses to invest money into. This work requires extensive analysis and research by checking a company’s financials, management and competitive advantage.
On the other hand, market prices for cryptocurrency are based on supply and demand, so the value fluctuates widely. At the moment, demand is high, so the value has been at record highs too. But there are still huge fluctuations: in April, Bitcoin reached a peak of around US$63,000. At the time of writing, its value was roughly US$38,000.
A cryptocurrency is referred to as a speculative investment, meaning it involves a high degree of risk and the price fluctuates. Speculative investment is usually done with a short-term focus, compared to a long-term investment where the value of the investment is expected to rise over the long term.
I don’t think there are many people who would want their first home or retirement savings subject to such extreme highs and lows, with the added risk they could lose the lot.
2. We hold cash as a store of value
Bitcoin is not cash. While it’s a digital currency, it does not hold its value for long. It could be up today, then experience a huge drop tomorrow.
I don’t think central banks will allow Bitcoin or other independent cryptos to become anything more than another commodity that is priced in USD. Central banks need to control the financial system (otherwise chaos will ensue) and they simply cannot allow another asset to take over as the main medium of exchange. They would then be unable to regulate the money supply, availability of credit, or interest rates.
Imagine if you were paid your wages in Bitcoin. Because of the fluctuation in price, your wages could vary hugely.
3. Crypto is wide open to fraud and scams
There are no physical cryptocurrencies. The currencies are created, traded and stored within a computer system called blockchain technology. It is not legal tender and often is used in illegal transactions.
In late May, China escalated its crackdown after a price surge in Bitcoin and other cryptos this year heightened concerns about the potential for fraud, money laundering and losses by investors. Cryptocurrencies are used widely by criminal gangs and cyber terrorists because cryptos aren’t regulated or government controlled. Cybercrime is on the rise and Bitcoin is the payment du jour for criminals.
Because cryptocurrencies aren’t regulated in New Zealand, there is no help when things go wrong for a cryptocurrency investor. Hacking, fraud and scams can be a big problem. Cryptocurrency platforms and investors are often a target of cyber crime. If your cryptocurrency is stolen, it’s unlikely you’ll get it back.
These aspects mean I do not support cryptocurrency as a serious investment choice. Sure, have a small gamble if you like, but I believe there are much better ways to invest your money.
Information correct as at June 2021. Pie Funds Management Limited is the issuer and manager of the JUNO KiwiSaver Scheme. Click here for our Product Disclosure Statement. Any advice is given by Pie Funds Management Limited, and is general only. It relates only to the specific financial products mentioned and does not account for personal circumstances or financial goals. Please see a financial adviser for tailored advice. You may have to pay product or other fees if you act on any advice. As manager of the Scheme we receive monthly fees that are determined by your balance and whether you are 13 years or over. We will benefit financially if you invest in our products. We manage any conflicts of interest via an internal compliance framework designed to ensure we meet our duties to you. For information about the advice we can provide, our duties and complaint process and how disputes can be resolved, visit www.junofunds.co.nz. All content is correct at time of publication date, unless otherwise indicated. Past performance is not a guarantee of future returns. Returns can be negative as well as positive and returns over different periods may vary. Please let us know if you would like a hard copy of this disclosure information.