Investor Points of Few – Is Bitcoin Keeping Bad Company?

By Alan Steel

It’s a currency without a country, has governance but no government and runs its own show based on sentiment, scarcity and the legend of Satoshi Nakamoto – and “his” nine-page white paper on a peer-to-peer electronic cash system.

And yet, despite crypto-currency Bitcoin’s anorexic foundations and arrival onto the investor scene just eight years ago, in amongst the fragility of the market recovery of 2009, the enticement of what is a mystifyingly complex concept, operated with meerkat levels of simples! (and tech support failures), is confoundingly strong.

In short, this currency strategy based on an uber-transparent and global voting system, run and monitored by everyone holding “the coins” at once, has truly taken hold of the investor herd’s imagination (and wallets) in 2017.

Go figure, eh? Bitcoin started the year worth less than $1,000.00 and has since touched near enough to the $17,000 mark.

Nice returns if you can avoid the arbitrage and assumptions of any real value, well, beyond speculation of the assumed vast wealth made by early adopters who range from taxi drivers and day traders to Winklevoss 1 & 2. 

Maybe call it a “celebrity currency?” Would that be both shortsighted and unfair?

Maybes yes and maybes no, but it looks and quacks so much like a euphoria driven duck-of-a-ponzi scheme that I’m not sure whether to throw bread at it or pluck its digital feathers.

And I wonder if there’s an assumption out there that this market rebel without a clause, is any more immune to economic forces than those boring-by-comparison and well-regulated (well, sort of) markets and major indexes of yore; the old farts of the Dow Jones, S&P 500, Nasdaq and that sideways moving crab-like British ambler, the FTSE.

The latest price action suggests it has a more fickle relationship with financial reality than Philip Hammond (for those of you stateside, he’s the chancellor of our chequered finances here in UK land). We really like him a lot.

Yet, truth be told, there’s a wonderfully energetic quality to these cryptocurrencies; a bit like experiencing the arrivals of Jimi, Janis, Jim, Kurt, Brian Jones and even Amy Winehouse on the music scene.

Millions of Millennials and market traders alike are literally tapping their fingers to its new and seemingly daily beats.

But the song that keeps coming back to me on Bitcoin is from the band Bad Company’s famous lyric: “Don’t you know that you are a shooting star, and all the world will love you just as long, as long as you are a shooting star.”

Now, I’m not sure if Bitcoin is the second coming of the dollar or just a fad in keeping with Bad Company.

We’ll see in time. 

But for me, after a brief listen to what’s going on out there, the song remains the same.

Alan Steel, Chairman, Alan Steel Asset Management

 

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