a good idea to pay pensions?
I got a message from Jo Cumbo for my comment on the use of Crypto as an investment to fund pensions yesterday. I couldn’t comment, because I don’t have the capacity to get to terms with it and because there are better things to trouble my brain about. But Jo is asking the right questions and talking to a consultancy (Cartwright) who have promoted Bitcoin to their client who has done very nice by this investment year one.
I see 50 odd responses to Jo’s question, this is a very contentious subject for investment consultants, fund managers and others cleverer than me.
My answer to Jo was for her to speak to Ian McKnight who I see has commented. He is someone who consistently talks above my pay-grade with me, as if I was half as brainy as he was and is always will be!
But the test I use for trustee investments is that trustees must be able to explain to members
- What the investment is in to and what difference the investment will make
- What good their money do in making their lives more sustainably worthwhile
- How much return can be expected and what the risks of that not happening are
I was taught this by Tony Filbin who is my touchstone in all this
I am afraid I am not in a position to answer the questions for Bitcoin or for any form of crypto currency. So long as I can’t I cannot support the use of it in pensions (mine or other people’s).
I can however get to grips with the use of the blockchain to manage investment administration and have been arguing on this blog the case for tokenisation. There is some cross-over between my thinking and those who manage crypto on Distributed ledger technology (DLT).
I do not find a high return on an investment over 12 months a sufficient argument for investment, I find comprehensible answers to the questions above compelling. If no answer is forthcoming as to what justifies Bitcoin being 56% higher in value than this time this year, I will put it in the same drawer as reports that the horse which one a Grade 1 at Goodwood this year at 120-1. It is a drawer which reminds me that unexplained wins are not going to repeat with any certainty!
The ball is with Sam Roberts of Cartwright to get to my grey matter (much depleted) if I am to want investments in crypto (even Bitcoin which Iain McKnight tells me is the best of that lot).
There is of course opportunity cost in making such investments. If no proper answers are forthcoming and you go ahead, you have to count the cost opportunity of ignoring worthwhile investments you have not made but wanted to. I know such investments exist and am prepared to share them on this blog as “good ideas” , “worth of due diligence” and “not tips” or “advice”.
Bitcoin has no intrinsic value. This is true also of most crypto-currencies. I will correct one impression in the blog above – Bitcoin has fallen in price over the last year from around $100,000 to around $86,000 now (-14%). Even if it was bought at the year’s low of $83,000, it would be showing a meagre return (around 3.6%) roughly comparable with the returns of money market funds, and well below the return of the FTSE.
Stablecoins do have an intrinsic value, to the extent they are backed by government debts (bills etc). We have however seen many where the support has been inadequate when tested. The open question is whether we will see central bank digital currencies.
By contrast the use of distributed ledger technologies (blockchain) holds the prospect of lowering the costs of administering real world assets when represented by tokens and includes adding value through facilitating their use as collateral.
If you want an illustration of how bad things can be, just look at the performance of the Trump cotery’s coins.
It’s down 21% on the year?
In the early 20s, after its peak in 2017, everyone was saying how btc was dead, altcoins were the future.
Then that market fell apart due to manipulation, fraud, leverage, idiocy, hype, and then BTC was all good again, and has remained so since.
It hasn’t changed much over that time, and in the post 17 crash (£17k to £2.5k!) the system forked about 4 or 5 times, risking values further (iirc bitcoin cash took 10% of the value of btc, and then subsequently fizzled, as did btc gold)
BTC came about during FIAT currency debasement, and generally trended counter FIAT instruments. Post 17 it correlated with them, and has since only been a proxy for s&p500 or similar indexes… but at least they have a basic fundamental value.
It even starts going UP with central bank QT, despite bitcoin now technically debasing while FIAT is destroying money!, and then goes up when central banks look like they’re due to pause QT and ease monetary policy.
It’s driven by hype by people clueless to anything except buy the dip because it’ll be worth more tomorrow.
All that said, my £150 “investment” is now nearly the size of the average pension fund, but it could also become worth nothing tomorrow.
Will the next 15 years be like the last 15 years wrt bitcoin? Good luck finding out!
Challenge accepted Henry! I’ll post on LinkedIn over the next few days and tag you.
Got scammed of $447k on a bitcoin investment platform. i agree iwas stupidd. It turned out the platform operated as a Ponzi scheme. I reported to the authorities and was made to write a series of statements which they didn’t follow through nor amount to anything, hence delaying the investigation. I lost my mind completely until a friend recommended me to cybersafe_001@yahoo.com a smart contract funds recovery expert who interceded and helped me recover most of what was swindled, thank you sir