Dryden Pence, the chief investment officer of Pence Wealth Management in Newport Beach, California, has joined a crowd of critics who are bashing bitcoin and bitcoin exchange-traded funds, even though the cryptocurrency’s prices keep rising.

“We are not big fans of bitcoin,” he says, adding that it isn’t really a currency but a trading mechanism.

“It has no central bank. It has no army,” Pence says.

“Nobody is there to enforce its value,” he says. “In the final analysis, your currency is only as good as your army.”

Pence has plenty of company, including in high places.

“If you're stupid enough to buy it, you'll pay the price for it one day,” Jamie Dimon, chairman, president and chief executive of JPMorgan Chase recently told a moderator at an Institute of International Finance conference.

J. Brent Everett, the chief investment officer and partner at Talis Advisors in Plano, Texas, agrees.

“While recent herding behavior may have driven the price up, the long-term expected return for bitcoin is less than the inflation rate,” he said. “An ETF or any other financial instrument based on exposure to cryptocurrencies only facilitates making a dangerous bet that’s completely dependent on timing.”

But the appeal of bitcoin ETFs is apparent, given the underlying rise of the cryptocurrency’s prices. In addition, the Securities and Exchange Commission and other federal regulators’ seemed to have recently warmed to bitcoin’s underlying technologies, such as blockchain.

Kathleen Moriarty, a partner in New York-based law firm Chapman and Cutler’s corporate and securities department and a member of the firm’s investment management group, represented the Winklevoss twins, Cameron and Tyler, in their initial application for registering their bitcoin ETF.

In March, the SEC rejected the twins’ bid, but agreed a month later to review its ruling.

Moriarty expects that as the industry grows and matures, more regulatory oversight occur.

“There will come a point when there is enough that the SEC will give approval,” she says.

The SEC will take some cues from overseas regulators and other industry regulators, including the Commodity Futures Trading Commission, Moriarty says.

Ryan Radloff also predicts that the SEC will come around in time.

“The SEC has been clear about its stance,” says Radloff, a principal at CoinShares, which has $300 million in cryptocurrency assets and issued the first bitcoin exchange traded notes on a European exchange.

“They need to see a more transparent and robust derivatives market with proper oversight,” he says. “The infrastructure to support this is in the works, though [it isn’t] robust yet.”

For his part, Pence discounts the significance of the SEC failing to announce an absolute aversion to bitcoin.

“Regulators don’t necessarily want to say no in high-profile cases,“ he says.

Miriam Rozen writes about the financial advisory industry and is a staff reporter for Law.com.

This story is part of 30-30 series is on navigating the growing world of choices for client portfolios.

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