Alex Chappell

9th February, 2018

IC Insights

Love at first sight… can sometimes have a nasty bite!

The bitcoin journey quite aptly characterises the early stages of a failed relationship. Dave Sheep is just a normal guy… good looking, mid-20s, athletic build with an infrequent interest in investments. He’s in town one day, just picking up a few bits when he walks into a shop and spots something quite spectacular… Miss Bitcoin. His eyes centre on her; she’s gorgeous, but not in the normal way… there’s something new and different about this one. Dave buys some bits for the sake of it, just for the chance to talk to her, and exits looking calm and cool on top with his heart racing underneath.

The day goes on, but he can’t stop thinking about her. He feels so attracted by the potential that he can’t help himself… he’s got to go back and ask her out. It’s not his smoothest move, made with a touch of heedlessness, but she accepts and his excitement grows. Donned in his best shirt and chinos, Dave picks her up and takes her to his favourite Italian. She’s a bit of a closed book, and he’s struggling to find what makes her tick, but what does he care, she seems to be enjoying herself and he’s becoming more and more infatuated.  

The date has finished, and from Dave’s point of view it was a resounding success. He was in resplendent form, and they are now exchanging texts. Miss Bitcoin loves a game or two though, she sometimes waits 24 hours before replying, and Dave’s enthralled by the up and down journey. Then suddenly, she cuts contact! At first he tries to play it cool, telling himself its just a blip that will sort itself out, but he can’t help but chase her to get things back on track.  Still holding out for a response, he visits the shop she worked at, but there is still no sign. A few rumours start circling, but Dave finds it hard to let go. Then things really hit rock bottom – he receives this message; “I’m sorry… this just won’t work”. Gutted! The worst bit… to this day he still doesn’t know why things fell off a cliff.

Bitcoin is of course, not a miss. It is a digital currency that can be used to transport money extremely quickly from one place to another… like a cheque that clears in milliseconds. The technology behind it is called “Blockchain” and although I won’t explain it in detail, I have no doubt that it will change the way we bank for decades to come.

There are a few issues with the bitcoin investment decision though. For one, it is subject to a ridiculous level of speculation and manipulation. It is not regulated in any of the major economies, and consequently has a lack of protection and security… it’s definitely not protected by the Financial Services Compensation Scheme that’s for sure! Then you have the volatility – at one point in 2017, its starting price had rallied more than 1900%, but it has halved since that point and frequently moves 20-30% in any one day. The problem with that type of journey is that unless you are very lucky with your timing, you can easily join the party at the wrong time. Then there is the fact that its notoriously difficult to withdraw your money from, so you have very little chance of pulling out if like Dave, things head down the pan.

There are many example of craziness in the bitcoin world, but I did see one the other day that really hit home. In 2017 the Long Island Iced Tea Corp, renamed themselves as the Long Blockchain Corp, and their shares quickly rose 200%, despite the fact they still make iced tea.

Removing the complexity and coming right back to basics, for me it’s quite simple; you don’t invest in something unless you have a rationale for why it should do well. Some would argue that the early stages of a new relationship/investment are more exciting than the mature stages of an established one, but I would say it’s just different. It may not create the same adrenaline rush, but it does provide contentment and security, a position where you feel confident that it will always be there when you need it most.

I certainly prefer the idea that my investment is dependable, allowing me to get excited about achieving my future goals and aspirations. Ironically, these aims usually include my loved ones!