With many of the major indices fluctuating and some disposable income to spare, people have been
looking at alternative ways to make money. Many have gravitated towards cryptocurrencies, most
particularly Bitcoin, although a plethora of these currencies have been created over the past few
years.
With the rise of social media in recent years, it is impossible to miss some self-titled expert talking
about how decentralised currency is the future and to invest now before you miss the boat, but is it
worth it?
The major drawback with Bitcoin is just how volatile it is. There is no knowing if it will go up or down
and by how much. It is literally on the flip of a coin. At the time of writing, the price of Bitcoin is up
34.30% year to date, but less than 3 years ago, we also saw a 70% drop over a 12 month period.
Bitcoin crashed in a similar fashion in 2018, and what is to stop it from happening again when a
simple tweet from Elon Musk can shift the market? These seismic movements mimic earlier
bubbles, such as the South Sea Bubble of the 18 th century and Tulip Mania in the 17 th century.
There is no doubt that anyone who got in early would have done extremely well, providing their
wallet did not get hacked and they had not forgotten the password to their account, but it is easy to
get carried away looking at the potential return based on past performance. One maxim that is
almost always true is that if you can see the bandwagon coming into town, then you have already
missed it.
Indeed, the Financial Conduct Authority recently warned people to be prepared to lose all their
money when investing in cryptocurrencies, because there is literally nothing backing them up. So,
are these schemes anything more than a gamble and can they be considered a rational investment?
Unfortunately, only time will tell – but the signs are that the world’s Central Banks will not want
there to be unregulated, untaxed, uncontrolled, and uncontrollable flows of capital around the
world. Cryptocurrencies are probably here to stay, but will they be controlled by the Central Banks
which the originators of these currencies are trying to get away from?
But what is the alternative? Unfortunately, the honest answer is that there is no certain, simple
solution to getting rich quick. The boring but reliable answer is that traditional investments, held
over a long period of time have almost always proved to be a certain get rich slow scheme. Not
quite as exciting, but boringly predictable. As Warren Buffet said, “If you are not thinking about
holding your portfolio or stock for 10 years, don’t even think about holding it for 10 minutes!”.
If you would like a down-to-earth, realistic view of your investments, then please contact us and one
of our expert Wealth Strategists will be pleased to run through your investment options with you.
