Thursday, September 1, 2016

Peaks, troughs and hacking: Why would anyone invest in bitcoin? - CNBC

In June, Chris Burniske, a blockchain analyst and products lead at investment manager ARK Invest, told CNBC he considered bitcoin to be a safe-haven asset. Despite the volatility and the cybertheft, he still stands by this view.

"The way in which it's a safe-haven asset is that it's so differentiated from the other assets. It doesn't move in tandem with them," he told CNBC in a phone interview on August 16th.

"Bitcoin provides a good option for a small percentage of someone's portfolio to park their money in a place that's completely uncorrelated to the rest of the capital market."

Part of the problem, according to Burniske, is that the Bitfinex hack, in which nearly 120,000 bitcoins worth around $70 million were stolen following a security breach, has tarred bitcoin's image.

"Bitcoin is only a safe-haven asset so far as it is stored and secured properly. A lot of interest has come to the space, and not all positive interest, since the Bitfinex hack which is definitely unfortunate," he said.

"Bitfinex's security protocols were not sufficient to keep the hacker out, but nonetheless bitcoin and bitcoin-blockchain remain a secure endeavour."

Investors who are considering investing in bitcoin need to survey the service provider landscape to decide how they want to access and secure their bitcoins, Burniske suggested.

"If a user wants to control 100 percent the way in which they access their bitcoin, there are hardware wallet providers, like Ledger, KeepKey and TREZOR," he said. "What those companies do is [provide investors with] a physical piece of hardware that you have to have in order to move bitcoin. It typically employs two-factor verification and a multi-frequency set-up. So that's extremely secure and you have 100 percent autonomy over your funds."

He also recommended GDAX and Bitstamp as reputable exchanges because they store most of their customers' bitcoins in cold storage, which is not connected to the internet and would require someone to physically break in and steal. They're also insured, so customers' accounts would be paid back in the event of a hack.

ARK Invest does not have any holdings in GDAX or Bitstamp. Burniske added that he stores the majority of his cryptocurrency with Coinbase.