BITCOIN

Zola.

If increasing numbers of extremely smart people find it a subject worth discussing, in a positive manner that is, are they a "crypto bro"?. That's a term you so often like to say, which is obviously a sarcastic quip at one's intelligence.. Something to think about..

Aegis

Zola. said:

If increasing numbers of extremely smart people find it a subject worth discussing, in a positive manner that is, are they a "crypto bro"?. That's a term you so often like to say, which is obviously a sarcastic quip at one's intelligence.. Something to think about..

I have no doubt that some extremely smart people were responsible for putting together credit default swaps and then touting them as the next big thing.  Sadly intelligence doesn't correlate to investment ability.

Zola.

Only time will tell...

Adyinvestment

@Aegis

As someone who is an IFA and also clearly against Bitcoin at this time, I am curious as to what it would take (if anything) for you to advise a client to consider putting money in Bitcoin?

Assuming this would one day be allowed in the UK for an IFA to do this, can you see an Aegis future self advising this and what criteria would you need to happen to do this? Is there anything Bitcoin could do to convince you?

Genuine question and not trying to start an argument, I am curious as to where Bitcoin would need to be for this to be considered or would it be out of the question for ever.

Aegis

Adyinvestment said:

@Aegis

As someone who is an IFA and also clearly against Bitcoin at this time, I am curious as to what it would take (if anything) for you to advise a client to consider putting money in Bitcoin?

Assuming this would one day be allowed in the UK for an IFA to do this, can you see an Aegis future self advising this and what criteria would you need to happen to do this? Is there anything Bitcoin could do to convince you?

Genuine question and not trying to start an argument, I am curious as to where Bitcoin would need to be for this to be considered or would it be out of the question for ever.

Even if it is an attempt to start an argument, I genuinely don't mind discussions with different viewpoints.  I just don't like being called stupid or dishonest - as long as you avoid those, we'll probably continue to be fine.

When it comes to crypto assets, I would probably never advise clients to go into them, largely because my focus is always on capital preservation and I usually make use of multi-asset funds or strategies because professionally it rarely makes sense for me to try to pick specific investments for clients - I leave that to people who have the ability to study economics and investment markets for the majority of their weeks.  As such, I probably wouldn't recommend any crypto assets, commodities, shares, bonds, etc.

A fair question would probably be "do any of your clients invest in bitcoin?"  On this basis, some probably did, as I believe Ruffer bought bitcoin within their strategy for a while, but then sold.  I have no idea if any other strategies have an exposure to bitcoin right now - not to my knowledge, but I've been out of the game for a while for health reasons.

Possibly a better question is what it would take for me to put my personal assets into bitcoin, as I am a higher-risk investor than the majority of clients I deal with.  In the case of my own investments I look for companies that either already generate revenues and are likely to increase that, or they have a good idea that I think will allow them to generate revenues over time (this is where some of my good ideas sit, and also some of my absolute howlers!).  As such, I can't foresee any way I'd put money into bitcoin.  I can't rule out every crypto assets in future because I can't predict what they might eventually look like, but nothing I've seen so far offers enough ownership of revenues, either current or potential, to make me want to participate.

As to whether I would ever advise clients to buy bitcoin, the answer is that usually I only ever advise holding currencies where the client is looking to spend in that currency.  As bitcoin is trying to be a currency, I'd only recommend holding assets denominated in BTC if there was potential to spend in BTC, i.e. without reference to an actual currency, e.g. GBP or USD, and the assumption would be that the prices in that currency would have a degree of stickiness.

Adyinvestment

Interesting answer.

It seems to me that people who are against Bitcoin are attempting to value it in the same way as a stock, and because there are none of the fundamentals that traditionally traders are acclimated to it makes no sense. As someone who has limited experience/time in the traditional form of investing perhaps I am more acceptable of Bitcoin with fewer barriers to break down, you do have to have some degree of "faith" to put your money in Bitcoin.

I am not a youngster but I imagine this is one of the reasons crypto in general appeals to the young, they do not have the same experience with traditional investing and are in affect a blank canvas, combined with how easy it is to find information (and misinformation) and do it yourself investing on the internet.

I find the whole for and against Bitcoin points of view quite fascinating, as it seems most have a very strong for or a very strong against point of view with only a smaller minority without a particular preference, I can see how to some there is an almost religious aura.

I am starting to ramble now and shall go back to my bottle of white...I guess only time will tell us how the Bitcoin revolution will pan out!

Aegis

Adyinvestment said:

Interesting answer.

It seems to me that people who are against Bitcoin are attempting to value it in the same way as a stock, and because there are none of the fundamentals that traditionally traders are acclimated to it makes no sense. As someone who has limited experience/time in the traditional form of investing perhaps I am more acceptable of Bitcoin with fewer barriers to break down, you do have to have some degree of "faith" to put your money in Bitcoin.

I am not a youngster but I imagine this is one of the reasons crypto in general appeals to the young, they do not have the same experience with traditional investing and are in affect a blank canvas, combined with how easy it is to find information (and misinformation) and do it yourself investing on the internet.

I find the whole for and against Bitcoin points of view quite fascinating, as it seems most have a very strong for or a very strong against point of view with only a smaller minority without a particular preference, I can see how to some there is an almost religious aura.

I am starting to ramble now and shall go back to my bottle of white...I guess only time will tell us how the Bitcoin revolution will pan out!

In my case - as someone "against bitcoin" - I am not really trying to value it in any way, just asking others how they do it.  In most cases the answers seem to be either "the netwrok will tend towards parity with X" where X is gold, or USD, or similar, or it's based on how things have behaved to date, ignoring the warning that past performance is not a guarantee of future performance.  I think the closest way you could think of valuing bitcoinis to make a comparison between it and traditional commodities, in that the actual ownership offers no revenues.  The issue is that the actual commodity in question also offers no industrial application or other demand for consumption.  As such, the closest way I can think about it is as a future with either an infinitely long time to the call date or no underlying asset on which the contract is written.  In either case, I genuinely can't ascribe any value to the contract itself, so my valuation for bitcoin has to be zero,

I genuinely hope that things work out well for those that innocently invest in bitcoin because they think traditional investments are too corrupt, but my worry is that most people will end up getting caught out when rationality reasserts itself and the value of bitcoin plummets.

Zola.

Fair points. Only a fool would put all their eggs in one basket, no matter what the asset class is... diversification is the name of the game after all.

Despite that, Bitcoin has outperformed every single investing opportunity since its inception, to not have ANY exposure at this stage of adoption is also equally foolish (in my opinion). It is the single most asymmetric opportunity of our lifetime. Past performance blah blah blah, the point stands...many of the worlds best investors from Paul Tudor Jones, Kevin O'Leary, etc all have Bitcoin now. Are they all wrong? Maybe, but having a position at least gives a huge opportunity if we are all right. 

I still anticipate another 8 years or so of heavy volatility with massive crashes as it grows and the market reacts to inevitable FUD. When Bitcoin mining has proven to be highly sustainable and it's 'acceptable' for public-facing entities to add bitcoin to their balance sheet, there may be a stampede to do so, and there just isn't enough to go around. 

ChesterDog

Adyinvestment said:

I find the whole for and against Bitcoin points of view quite fascinating, as it seems most have a very strong for or a very strong against point of view with only a smaller minority without a particular preference, I can see how to some there is an almost religious aura.

I expect there's a tendency for forum posts to present a polarisation of viewpoints, as those are the people most likely to be motivated to post on the subject and to "correct the erroneous views" of others.

Personally, I'm pretty agnostic on the subject as, I imagine, are many of the silent majority here.

Ironically, I find one of the biggest hurdles to developing a clear view of the subject is this very business of discussions tending to be dominated by entrenched views, often pushed at people, and the varying degrees of contempt for alternative viewpoints. 

It seems to me that an appreciation of cryptocurrency as an investable asset requires one to take a viewpoint, a considered judgement, the acceptance of a degree of faith that cannot really find a comfortable home in the analytical mindsets of those experienced in more conventional investments.

I used to think you're either the sort of person willing to accept that situation, where valuations have no measurable intrinsic basis while still accepting their potential validity, or you're not.

However, it seems increasingly to me that the sensible approach is to accept that (despite the hot air), nobody really knows where it's all headed, so it's probably worth getting on board for the ride, even if in only a small way, accepting and embracing the fact that only hindsight will have the answer.

caprikid1

Am I the only one who finds the term "crypto assets" to be slightly amusing ?