Investing in the blockchain technology remains highly speculative despite its revolutionary potential, according to one advisor.
Devin Cattelan, associate investment advisor at Cattelan Private Wealth Counsel, HollisWealth, says it is not clear how the digital ledger system that underpins cryptocurrencies will ultimately be implemented, despite yesterday’s announcement that Oakville-based Harvest is to launch Canada’s first blockchain tech ETF (HBLK).
After Bitcoin’s hyped entrance into the Futures market, blockchain’s future role will be fascinating, says Cattelan, and he expects it to be adopted by a host of software companies. However, he believes it is hard to see it as a viable investment opportunity.
He said: “The blockchain technology in general is pretty incredible, allowing for the almost instantaneous transfer of information, highly encrypted, so the blockchain I think is revolutionary.
“Now the question is, from a monetary perspective, how do you monetise it? Our belief is that cryptocurrencies aren’t really a sound investment. Now whether or not they will be used going forward, we could see potentially that they’re used and adopted by central banks.”
Cattelan says the trouble with cryptocurrencies and blockchain is that they don’t produce any earnings, unlike a stock, real estate or a private company. He said: “With cryptocurrencies there is no real fundamental value behind it, so they are impossible to valuate.”
The uncertainty around who will use blockchain is compounded by the question of whether banks will embrace the technology despite the prospect of it reducing their own transaction fees. Cattelan believes that despite blockchain’s enormous capabilities, it does not fit in with his company’s philosophy.
He said: “I can see opinion changing as the technology gets adopted into other means. As it stands, it is impossible to monetise but I can see it being implemented in quite a few things.
“Our philosophy is we look at individual companies, and the companies have to have sustainable free cash flow growth, balance sheets. So unless we see those factors developing in a company that uses blockchain technology, we won’t take that investment.
“So right now it’s in the highly speculative phase and it’s still hard to see how it’s going to be implemented.”
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