Spotlight: Bitcoin

Media turns to VFA for expertise once again!

Our growing national reputation as one of the leaders in the fields of financial planning and investment portfolio management has increased the amount of media requests we receive each year.  The current article which quotes Mark LaSpisa is about Bitcoins.  A new topic which you may have heard a little about.  

Wall Street JournalAccording to, Bitcoin is a completely digital form of money, and a consensus network that enables a new global payment system.  It is the first decentralized peer-to-peer payment network that is powered by its users with no central authority or middlemen.  From a user perspective, Bitcoin is pretty much like cash for the Internet.

There is a growing number of businesses and individuals using Bitcoin including brick and mortar businesses like restaurants, apartments, law firms, and popular online services such as Namecheap, WordPress, and Reddit.  While Bitcoin remains a relatively new phenomenon, it is growing fast. At the end of August 2013, the value of all bitcoins in circulation exceeded US $1.5 billion with millions of dollars worth of bitcoins exchanged daily.

This my seem like a large number, but compared to the world’s gross domestic product (GDP), it’s a “drop in the bucket”!  Given this kind of activity, the next logical question is…

“Should You Invest in Bitcoin?”

According to author Anna Prior, “It takes a strong stomach to buy the virtual currency, but some investors believe it could be a smart move.”Anna Prior

This Article was posted on April 10, 2015 to The Wall Street Journal.comby Ms Prior, a WSJ reporter who covers alternative investments and strategies, as well as taxes and estate planning for WSJ’s Wealth Adviser.  Former positions include breaking news reporter for WSJ’s real-time desk, personal finance reporter for SmartMoney magazine, and news assistant and personal finance reporter for The Wall Street Journal Sunday.

Please take a moment to read the article below, with Mark La Spisa’s additional comments that follow, and feel free to share it with others.  We are always looking for topics of interest from our clients for future e-bulletins or newsletters, and the reporters we assist are always looking for feedback to their articles.  Should you have any questions, comments, or suggestions on this or any other topics of interest, please feel free to e-mail your advisor at or call us at 847-382-9999.

We hope that you enjoy the mention of your very own Vermillion Financial Advisors in the media as a reliable and experienced financial planning resource.  We think of it as just one more reason VFA surpasses the competition.


Should You Invest in Bitcoin?


Bitcoin has seen far wider price swings than the broad U.S. stock market. Photo: Karen Bleier, AFP, Getty Images

Is your stomach strong enough to take a flier on bitcoin?

The value of the virtual currency can fluctuate wildly – even in a single day.  From July 2010 to February 2014, its price was 26 times more volatile than the S&P 500, according to Matt Elbeck, a marketing professor at Troy University in Alabama, who co-wrote a recent study about bitcoin with a colleague, Chung Baek.

In addition, nearly a half-billion dollars’ worth of bitcoin disappeared last year from Mt. Gox, once the dominant exchange for bitcoin trading.  And regulators are paying increasing attention to digital currencies, adding another element of uncertainty.

For many investors, those kinds of risks are reason enough to stay far away.

Yet bitcoin could have some virtues for certain investors.  “It doesn’t trade with stocks or bonds or gold or any other asset that typically appears in a mass-affluent portfolio,” says Nicholas Colas, chief market strategist at New York-based brokerage firm ConvergEx Group.

There also is growth potential, given that digital currencies are in their infancy. Investment firms show growing interest in the currency and in the technology behind it, which could point to more widespread use.

This year, the value of bitcoin has fallen about 23%, through April 9th, according to a CoinDesk index.  Still, a single bitcoin is worth $243.26, up from less than $5 three years ago, according to the index.

Dedicating a small sliver of your portfolio to bitcoin may make sense for a younger, affluent investor who won’t get spooked by sharp swings in value.

Mr. Elbeck says such a stake should represent less than one-half of 1% of your investments.

“And investors who will need to tap the money in the near term – or whose finances would be compromised if the investment became more or less worthless – should stay far away,” says Mark La Spisa, President of Vermillion Financial Advisors in South Barrington, Ill.

 “If you want to try your hand at being a day trader with this, go ahead and have fun, as long as you invest a small amount that won’t have a negative impact on your long term goals or your retirement,” Mr. La Spisa says of bitcoin and other risky investments.

Investors can purchase bitcoin online through websites such as San Francisco-based Coinbase.  The currency is stored in a digital “wallet,” which could be on your computer’s hard drive, online or in an offline “vault” operated by a storage firm.

Another option could be available soon.  Bitcoin Investment Trust, the first publicly traded bitcoin fund, is expected to start trading in May, 2015, according to Michael Sonnenshein, a spokesman for fund sponsor Grayscale Investments, a subsidiary of New York-based Digital Currency Group.  Each share of the fund will represent about one-tenth of a bitcoin, minus fees, he says.


A Few More Comments From Mark La Spisa…

Mark Laspisa
What makes a new currency?  When society determines that a particular item is sufficient as a way to make payment for any service or product, then that item is deemed currency.  As the article explains, bitcoin is a new form of currency; one that is digital in nature and mainly used for internet purchases.  However, as more and more retailers and large companies increasingly accept bitcoin as a way to make payment, it becomes more viable as a currency.

Large companies such as Amazon, eBay, Target, and Subway have jumped on board in accepting the new digital currency.  This recognition helps to legitimize and raise its value, along with the possibility that one day it could make the jump to mainstream acceptance as a way to pay for all goods and services.

As with any commodity, any time there is an opportunity to “get in on the ground floor” there will be those interested in investing.  However, if you are going to consider this, just like with any other investment, it is highly recommended that you clarify your expectations up front.  Why would you be buying Bitcoin?  What is it that you expect from Bitcoin?  Can you handle the risk if Bitcoin ends up worthless?  These are some of the basic questions an investor should consider prior to making any Bitcoin investments.

If after answering these questions you still feel a desire to invest, then go ahead and do so.  But do it with funds you can afford to lose; funds that if lost, will not negatively impact long-term objectives such as your retirement goals.  For most investors, Bitcoin will not be considered appropriate as part of a well-balanced long-term portfolio, mainly because presently it is not controlled or regulated by banks, or governments of any kind.

Finally, after doing your research and as a way to take that occasional flier on something new or different, should you still desire to make an investment into Bitcoin (or any other new or speculative investment), then do so as you would most other things in life – do it responsibly.

Mark LaSpisa


Disclosure:  The opinions voiced in this material are for general information only and not intended to provide specific advice or recommendation for any individual.  Please remember that past performance of investments may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this article, will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. 

Due to various factors, including changing market conditions, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this post serves as the receipt of, or as a substitute for, personalized investment advice from Vermillion Financial Advisors, Inc.  To the extent that a reader has any questions regarding the applicability to their individual situation of any specific issue discussed within this publication, they are encouraged to consult with the professional advisor of their choosing.  A copy of our current written disclosure statement discussing our advisory services and fees is available for review upon request.