Original article published in April 2021. Updated May 2025. 

There is no shortage of news stories about Bitcoin in the media, but what exactly is Bitcoin? What should you know about it and how do we, as financial planners, think about it? 

Few major financial topics have brought about the level of confusion, misinformation, and divergent opinions than Bitcoin. For something so ubiquitous across financial media, you are more likely to know someone seven feet tall than someone who can explain what Bitcoin actually is. In this article our goal is to give a basic understanding of Bitcoin and share our perspective on why it isn’t part of our investing and financial planning philosophy at this time.

Bitcoin (ticker symbol: BTC) is the most prominent example of a “cryptocurrency”. Cryptocurrencies are “digital currencies” that are not regulated and therefore not backed by the full faith and credit of any government, unlike the US Dollar, the Japanese Yen, etc. Curious how many different cryptocurrencies are out there? Thousands. Aside from the hype and hope of striking it rich, cryptocurrencies have found favor in the market, despite their drawbacks, for a few reasons. The primary reasons being that Bitcoin isn’t tied to a central bank, transactions are cryptographically secured using “blockchain” technology, and transactions are private.

Bitcoin was created in 2009 and languished in the world of technologists and computer geeks for several years. An early Bitcoin story from 2010 involves what was likely the first use of the digital currency to make a purchase – two Papa John’s pizzas. Bitcoin continued a slow rise in value, with the price of one bitcoin first hitting $100 in 2013 and $1,000 in 2017. During this time BTC’s price moved mainly as a function of increased awareness and speculation, not because of widespread use or acceptance as currency. Volatility, to put it lightly, is a hallmark of BTC, with price swings of 10% or more in a single day not uncommon. As the time of writing in 2021, the price of a single Bitcoin hovered around $55,000, meaning the bitcoins used to buy those pizzas would now be worth over $500,000,000. Bitcoin prices continue to fluctuate.

Putting aside the extreme volatility you may still have several questions about what seems to be intangible computer money.

If I can’t use it to buy things, is it really a currency? Crypto payments are now accepted in more places (like some online retailers and payment processors), but has not, as of yet, achieved widespread adoption.

Is it an investment? We don’t think it is because it isn’t tied to anything tangible like corporate profits and can’t be physically held like gold. Bitcoin fits squarely into the category of speculation.

What gives it its value? Like with fiat currency it is based on faith in a system and the technology that underpins it, known as “blockchain” technology. However, the Bitcoin ecosystem is currently small (compared to traditional financial systems), un(der)regulated, and can be difficult to navigate if you aren’t technologically savvy.

For these myriad reasons we regard Bitcoin and the rest of the cryptocurrency universe with extreme caution. While Bitcoin-related ETFs have since been approved and are available in the U.S. market, we continue to evaluate these products and currently do not include them in client portfolios due to our investment philosophy and risk considerations.

As always, we continue to monitor developments in the cryptocurrency space and consider how new technologies may impact our clients’ financial plans. For example, these assets have unique tax and estate considerations, and as comprehensive financial planners, we want to ensure our clients are informed about the ramifications of this emerging asset class. While Bitcoin still does not meet our investment criteria, we remain committed to helping clients navigate questions about emerging financial trends, so if this article has spurred new questions for you contact your Financial Planner today.