Columnist Paul Sutherland shares his perspective on cryptocurrencies.
Question: My son just made money investing in bitcoin. I’m glad he’s investing, but what do you think about cryptocurrencies?
Are these a good thing or a bad thing?
Paul Sutherland: You might ask your son if he banked his bitcoin profits or if he’s holding out for more. This and the other cryptocurrencies are incredibly volatile, and any “paper profits” could vanish in an instant.
I remember, back in the Internet bubble era, chatting with “paper millionaires.” They would ask me, as an investment advisor, what they should do with their red-hot portfolios. I would say, “Sell!” They would reply, “You told me to sell three weeks ago and I’m up another 10 percent.” I would respond, “You’re still best off to sell now while the market is giving you a gift—there is no way those companies are fundamentally worth anything near current prices!” Their eyes would roll up into their eyelids.
For the few who did listen, I would suggest they look at the other things they could do with these unrealized gains if they sold: paying off their debts, purchasing a home, or helping their favorite cause with a signi …