Everybody Is Talking About Bitcoin!
There has been a lot of attention regarding Bitcoin and other crypto currencies over the last few months; it seems like every other social media post contains some reference to it and pronouncements by major investors such as Elon Musk of Tesla have a huge impact on the price.
Whilst we do not want to go into huge detail or analysis of Crypto Currencies – at the bottom of this article are links to articles from sources that we read if you are interested in more information – we felt that a look at some of the factors at play may give you an insight into what its all about.
- Bitcoin is a digital currency that is considered a store of wealth outside of the existing monetary system and Government controls.
- Whilst there is a limited supply of Bitcoin, so it can’t be devalued by a Government printing money, there is no a limited supply of crypto currencies there are alternatives.
- It is – currently – easily traded with “blockchain” providing a single ledger of all ownership and transactions
There is no doubt that Bitcoin has been a fantastic development in just over a decade and that many people have become extremely wealthy from investing in it and has also become increasingly accepted by the mainstream and some Institutional investors. In fact one of the Multi-Asset funds that we recommend that has a very consistent, and conservative, approach invested 2.5% of its assets in Bitcoin last November when it was valued a $15,000; as it passed $50,000 Citywire report that this investment has made the Ruffer as a firm a tidy 233% ($700m profit).
However, before we all rush off to open an online account there remain factors that need to be considered.
- Whilst there is limited supply of Bitcoin, there is not limited supply of Crypto Currency; we could easily see investors move to other digital currencies negatively impacting the price.
- Government could get rid of it through heavy regulation leading to a slump in demand.
- It is not a medium of exchange most businesses do not accept Bitcoin as payment for goods.
- How protected is it from cyber-attack? Is it as private as you think?
- With reasonable frequency Bitcoin has fallen by 80% or more – is the volatility worth it?
Another issue we find is that the whole concept appears to be divisive with two clear camps of love it or loathe it; the “love it” camp seem to be well in charge at present and this could well increase in numbers as there is nothing worse for many in seeing their neighbour get rich! We are not experts in Bitcoin and at present do not advise or include it as a direct investment in our portfolios; however, we do see its merits and are happy to include funds that hold it as part of a well-diversified portfolio.
Bridgwater Capital – What I Think of Bitcoin