The following article was posted on 12th January 2018 by Booming Lives member John Nugée.
A couple of weeks ago a friend asked me my views on Bitcoin. Should she invest in this strange new concept – part currency, part commodity, part will-o-the-wisp? Lots of people seem to have made an extraordinary amount of money in it, she said.
I gave her what I thought was a reasonably factual analysis, and added some numbers which probably merely doubled her angst at not getting in earlier. But largely I confessed to being baffled. It seems to me so obviously a huge South Sea bubble, with no underlying value at all: indeed the only possible reason for buying a Bitcoin is because you think a greater fool will one day buy it off you for an even more ludicrous sum.
I ask myself what a Bitcoin is worth, intrinsically, and I literally cannot give an answer. When it passed $500 (not that long ago) I wrote that I had no idea whether it would reach $50,000 or $5 first, and even now it has been up to nearly $20,000 I still don’t know which is the more likely.
Bitcoin is unregulated, unbacked, unsafe (Bitcoin exchanges have a habit of “losing” coins, usually I suspect to an inside job) and impossible to value. It can gain or lose 20% in price in a day. It exists in a shadow world with no investor protection and no transparency. There is no value creation behind it, no income stream to support it. It mainly appeals to criminals, charlatans and the terminally naive.
Finally, despite the claims of its creators it is not even in finite supply, because although Bitcoin themselves might be limited, one can create an infinite number of lookalikes, such as Bitcoin cash, Bitcoin moolah, Bitcoin wonga, Bitcoin dosh and so on. There were over 500 new cryptocurrencies launched in 2017 – and even those who follow the field would struggle to name more than half a dozen of them. A few might fly for a while; most will make their creators far more money than those who “invest” in them.
I think if you do want to put money into Bitcoin you have to be prepared to lose your entire stake – and if you are wealthy enough to do that you don’t need my advice. For myself I have a very firm rule never to invest in something I don’t understand and I have no intention of getting involved in Bitcoin.
But apart from that, it is a fascinating subject to discuss and observe. From the outside.