Investment Strategy:  Third Quarter 2021Bitcoin – A Dustland Fairytale

I didn’t really want to write about Bitcoin as I don’t know much about it but it is an asset that increased by up to a gazillion times and then fell twice as fast and with so much ink being spilt I feel duty bound to enter the fray.  

I confess to sitting largely in the ‘it’s speculative, therefore ignore it’ camp, but it’s not particularly heroic saying so when the price has just taken a beating and I’m conscious I didn’t raise my head above the parapet in the last Quarterly when the price was, well let’s just say, higher.

Predominantly because I just don’t understand bitcoin mining, blockchain or how to differentiate between Dogecoin, Litecoin or Monero, I find it’s easier to quietly ignore it and continue to worry about what we do invest in, rather than what we don’t.

What is apparent is there is too much speculative activity in crypto from people who almost certainly understand it as well as I do. People liken it to gold, but at least gold has a track record stretching back millennia and has physical, real world uses, despite it not delivering a tangible yield. For people who argue crypto is like a currency, then it is more a cousin of the Argentine Peso or Venezuelan Bolivar than the twin sibling of the US dollar. 

Over the long-term, I wouldn’t argue against a regulated, central bank controlled digital currency infrastructure ultimately becoming the norm, which may well marginalise/regulate out some of these early winners. What has recently become clear too is the power governments or  authorities have to cause holders of crypto trouble, whether it be in China who are closing down ‘bitcoin mines’ and restricting speculative trading or the US who seized Bitcoin paid as a ransom from the criminals who demanded it. Is nothing sacred anymore?

Bitcoin seems to me to have no intrinsic value to support its price and it has become a vehicle purely for momentum-based speculation. We have already noted the fluctuations in Bitcoin’s yo-yoing price. A real yo-yo can be a spectacle or it can tie you up in knots, depending on whose hands it is in; alternative cryptocurrencies are springing up in their multitudes but countries and their regulators are taking aim. Buyer beware!

Download PDF
Print Friendly, PDF & Email