LM portfolio as at 24/06/2022:
| Code | Sector | Date Bought | Cost | Value | Gain/Loss |
|---|---|---|---|---|---|
| LM045 | Gas, Water & Multiutilities | 06/12/2021 | £1280 | £1170 | (8.15%) |
| LM047 LM047-2 |
ETC | 17/01/2022 03/03/2022 |
£2530 | £3010 | 18.69% |
Bitcoin's price has been tumbling and currently stands at around $21k. It was at almost $69k last November so it has fallen a long way in just 8 months. A MONUMENTAL crash, basically.
Could you imagine if the Dow Jones or the FTSE 100 fell 70% in 8 months? It would be the end of the world!
But are we really surprised that Bitcoin can plummet so far down from such a ridiculous high?
Bitcoin is, let's not forget, a system based on a string of letters and numbers. That is all it is - secret codes that, providing they remain secret, appear to hold value in that somebody elsewhere will buy the "asset" that these codes represent.
I'm simplifying but that's the basic gist of it.
I held Bitcoin for several years. It was only a little bit but I did hold it. About 6 years ago I put £15 in to see how it all worked. It wasn't an investment and I didn't think I'd ever make any money from it.
As it happens the value of my Bitcoin increased more than 100-fold before I decided to cash in and I made a very good decision to sell when I did as the price has pretty much halved since my exit.
One thing that always concerned me about Bitcoin, and any cryptocurrency based on public key infrastructure, is that the whole thing could be destroyed if anyone could hack the encryption behind it.
Bitcoin only has value if the private keys remain private. If computing power increases to the point where these keys can be determined (hacked) then wallets aren't secure any longer so Bitcoin collapses to zero.
Funnily enough this was mentioned in the Weekend FT at the beginning of June. Gillian Tett wrote "when quantum computing takes off, it will be able to break current encryption systems". And that means Bitcoin, amongst plenty of other things.
We may have a decade or so before the computers that can do this are available in a workable form but it's something to think about.
If this latest cryptocurrency crash doesn't put an end to the cryptomarket now then quantum computing probably will sometime in the 2030s.
Reading through Reddit threads relating to Bitcoin you could be forgiven for thinking it's the dot com boom all over again. Bitcoin lovers aren't worried whatsoever about the price collapse.
No, they're happy with this crash because it allows them to buy more Bitcoin at a cheaper price. Some are buying regularly using a technique called "dollar cost averaging". They shorten it, of course, to "DCA" and the way they talk about it makes it sound like a new concept.
It's AMAZING that no-one thought of this before! Of course, this is the kind of thing people were doing with internet shares back in 1999/2000. Any drop in the price of Cisco wasn't a BAD thing, no, it was an opportunity to buy more "whilst they are on sale". It ended in tears then and it will end in tears again.
Bitcoin was supposed to be a new transactional currency when it first arrived. Sentiment quickly changed once the market decided that 1 Bitcoin was "worth" tens of thousands of dollars. Today, most people only buy Bitcoin in the hope that they can sell it on to someone else in the future for more money.
Greater Fool Theory anyone?
No?
Ah, I get it... this time it's different.
The LM Portfolio
LM050 was closed off this week after a large drop in the value of the ETC. This mirrored the drop in the underlying commodity - Natural Gas.
I won't lie, it's very disappointing as at one point this position was showing a four-figure profit. By the time I got around to closing it, this profit had shrunk to just over £300 which, while great, irritated me just a little. A 16% drop in one day didn't help but this is what you have to expect when dealing with commodities.
And with the stockmarket doing nothing but perhaps slowly dropping, there aren't many alternatives if you want to trade at the moment.