Love them or hate them, cryptocurrencies aren't going away any time soon.
Because of this, I think now is a great time to decide whether they are something you would want in your portfolio now or in the future.
To help you decide, I've put together a list of pros and cons. Here they are:
Pros.
Bitcoin is increasingly being seen as a safe haven asset and a real alternative to gold. If tensions in North Korea intensify to the point of conflict, there's every chance that the Bitcoin price will outperform gold ETFs and Newcrest Mining Limited (ASX: NCM).
In modern portfolio theory investors are urged to diversify by investing in assets that do not correlate. By doing so, investors can reduce their overall investment risk. As Bitcoin has no correlation to any other asset classes, it would theoretically make a portfolio more diverse and reduce its risk.
Some experts believe the Bitcoin price could reach US$100,000. According to CNBC, an analyst at Saxo Bank thinks it could reach this level in 10 years as cryptocurrencies grow to account for 10% of the average daily volumes of fiat currency trade.
Cons.
Bitcoin could be in a bubble and it could burst. Approximately three-quarters of Bitcoin trading is believed to take place in China. There are concerns that Chinese traders are driving up the price of the cryptocurrency in the same way they drove up iron ore futures. Should the Chinese government's crackdown on cryptocurrencies lead to a complete ban on trading, I suspect the Bitcoin price could come crashing down with a thud.
There's no way to value a Bitcoin. When investing in an asset you want to buy it at a fair price, but deciding what is fair for Bitcoin is near impossible. However, the same could arguably be said for gold.
One final concern I have is safety. Unlike your Telstra Corporation Ltd (ASX: TLS) shares, there is a danger that hackers could steal your Bitcoins and there's little you can do about it if they do. There have been at least three high profile cases in recent years where millions of dollars' worth of Bitcoin have vanished into thin air.
Foolish takeaway
I'm still sitting on the fence with Bitcoin. I'd suggest anyone seriously contemplating snapping up the cryptocurrency wait to see what the Chinese government does over the coming weeks.
But if you can't wait for that, then at least restrict any investment to just 1% of your overall portfolio.
