01/12/2017
“Should I buy into the current bitcoin scheme?”, I was asked for the umpteenth time this week. My experience shouts “No!” – and especially not if you are labelling it a ‘scheme’. But am I like the horse-riding mayor of yesteryear, sneering at Henry Ford? Let’s take a look.
“Should I buy into the current bitcoin scheme?”, I was asked for the umpteenth time this week. My experience shouts “No!” – and especially not if you are labelling it a ‘scheme’. But am I like the horse-riding mayor of yesteryear, sneering at Henry Ford? Let’s take a look.
Blockchain for Dummies
Before we get into digital currencies we have to first understand blockchain which is the enabler of all of this hoopla.
Here’s how I visualise it. Remember the library books you took out as a kid? The date was stamped on a piece of paper in the book and the librarian would tap earnestly into his/her big box of a computer. But those records were only visible to the person with the book. And the librarian.
Now imagine a village library with 20 books. And 50 residents. Each resident has their own colour of Lego bricks. Let’s say I’m yellow. And each book has its own Lego base, or docking station, in the village square. Every time someone borrows a book, they add a Lego brick of their colour to base 1. Which is then stuck down tight and can’t be moved. When I return my book and someone else takes out that book they add their different coloured Lego brick on top of my yellow brick. And so on. After a year, there is a tower of Lego blocks, so we have a publicly visible record of ownership. Who last had the book and who has it now. And you can’t fiddle the blocks because the other 49 people in the village are watching.
Now imagine that the librarian of the past was Robert Mugabe. You don’t trust him and the computer which only he sees and controls. Or imagine the librarian is a dodgy land registrar in Costa Rica, open to bribes. This is the appeal of a decentralised record of ownership. It removes the impact of a bad egg. Expand that thought process to all those people in banks sitting in Canary Wharf tapping away, entering the same invoices and the same money movements into each of their computers multiple times, because they don’t trust each other and it’s MY WAY OR THE HIGH WAY! That all – in theory – becomes redundant with blockchain. There’s a central, public record not owned by any one bank or Government.
BITCOIN
Bitcoin and other digital currencies are enabled by this blockchain which keeps a public record for all to see – except they just see you as holder of yellow Lego bricks, not Holly Mackay. So public but hidden. This crypto-currency has doubled in value in less than 2 months from $5,000 to $10,000 this week. By way of comparison, the biggest year for US stocks was in 1915 when the Dow Jones industrial average went up by 82%. One-tenth of bitcoin’s rise this year.
As always, the price of everything and anything is simply down to supply and demand. A) How much is there. B) And how much do people want it? That logic applies to Cristiano Ronaldo (A. Only one and B. a lot). Cabbages. (A.Tons and B.not a lot). And bitcoin. (A. Some. B. Loads). (Honestly don’t ever let an economist tell you’re their job is hard ever again!) This new currency is seen as an alternative to gold as a place to store money outside the control of governments and banks and it’s running hot. Lots of people want it right now. There’s also good old fear of missing out. “OMG it’s going gangbusters let’s all pile in!!!”
WHAT’S THE PROCESS?
To research this piece I read up more and ended up at www.blockchain.info I don’t like writing about what I don’t know and curiosity killed this cat. So I set up an account with Coinify and spent £200 on bitcoin. (£200 which I wouldn’t be surprised to lose so this is all in the name of research, not greed). What a laborious process! Passport uploads. Full address entered. Phone numbers. Codes sent to mobile phones. First card flat out declined. Second card triggered an immediate fraud alert and call from the bank. And after all that - a one day verification process but an emailed receipt from Coinify in Denmark. Blimey!! I suspect the drug dealers don’t hang out here – this site knows more about me than my sister! Anyway. I am now the sceptical owner of 0.02603156 BTC. Oh high and happy day.
SHOULD I BUY?
Every bubble follows a pattern. And when non-experts like myself write blogs such as this for non-experts like most of us – well we’re typically in the Greed stage of the bubble. Which usually comes before meltdown. I reference South Sea bubbles, tulips and the dot.com crash. So although more than $5 billion was traded on bitcoin exchanges last Sunday, I prefer to sit this one out, allocating the bare minimum to be able to write about the process and experience. There are so many regulatory risks, risks of the unknown and risks of a panicked run in Bitcoin that I’m not prepared to take the punt.
Anyone who does want to buy in at this stage should treat it like gambling and only put in what they can afford to lose.
PS Just when you thought your brain might fry, the Chicago Mercantile Exchange will launch Bitcoin futures in December. So people can short bitcoin. Which one fund manager I spoke to today thought could further boost the price as people bet on it falling, it doesn’t at first and then people are forced to close out their positions and…..ouch…..
Related Questions
-
I recently came across your blog and it has been a great introduction to learning about my personal finances. I was wondering if you could recommend any additional resources (websites, books, online help) for beginners and that are tailored to the UK market. I am in my early 20's and I'm looking to further my knowledge of money, and foster a greater relationship with it. In addition to that, I'd like to know your opinions on how the possible outcomes of Brexit will affect the market and potential personal finance investments.
Rita | London | 23/01/2019 | 0
- Stocks and Shares ISA
- Robo Adviser
- Online Investment Platforms
-
I've been reading recently about how investment trusts are much the same as funds, but are cheaper to own. A: Is this true? and B: Do you have an article on Investment trusts on your site?
Nick | Surrey | 16/01/2019 | 1
- Funds
- Other
-
I’m a 20 something year old woman who’d like to learn more about investing. Do you have any books or reading material that gives a complete beginner a better understanding of how investing works?
Precious | Surrey | 03/01/2019 | 0
- Stocks and Shares ISA
- Online Investment Platforms
-
From my retirement I received a lump sum of money and a monthly pension. I have £100,000 that I do not need for the foreseeable future... One of my main concerns with Financial Advisers are their costs... All I want is simply to see this money grow to its potential, sensibly and above inflation... Therefore my next thoughts are Stocks and Shares ISAs... My only concerns here are the current Brexit problems - I saw the FTSE drop this past week. I cannot find any information out there to assist with my decision making if this is certainly a good time to invest... I am aware that I can place £20,000 for this year. Come April 2019 I place another £20,000 and so on until the £100,000 has been utilised. Do I have to place it into the same fund or can I choose another different fund with a different company?... Please can you help to ease some of this burden, which has proved an awful part of my retirement and made me frightened to spend any money.
Katherine | Derbyshire | 02/01/2019 | 0
- Private Pension
- Stocks and Shares ISA
- Cash
- Robo Adviser
- Online Investment Platforms
- Workplace Pension
-
I often find that my monthly salary is spent on things I don't need or just saved up; without accumulating much. So what can I do with my money to make money? I am not expecting you to tell me where and when to invest but simply what to read, and I guess I really would like to know how you became an expert, where did you start? I feel like investment is something so big I can barely even touch it, and I would greatly appreciate any words of advice you could share with me.
Beth | London | 07/12/2018 | 4
- Stocks and Shares ISA
-
I'm the sole carer for my chronically ill and elderly mum, as well as a full-time police officer. I have no other family apart from her. Due to mum's condition, and the fact that I'm exhausted performing both roles, the only option is to go part-time, as mum won't accept help from anyone else. To allow me to go part-time, I will need about £25,000 until March 2020 when I will be retiring. I’m confident of getting another job shortly thereafter. In January 2021, I will receive a commutation lump sum of about £50,000. I have a sizeable fund portfolio under an ISA wrapper with Hargreaves Lansdown. That is doing very well, so I don't really want to sell any of these funds and 'lend myself money' from that. My ideal funding solution would be a bond-type IOU agreement, where 'someone' lends me the money. Are you aware of a peer-to-peer site that could assist? Thanks
Dave | Hertfordshire | 27/11/2018 | 1
- Stocks and Shares ISA
- Online Investment Platforms
- Other
-
Do you have any recommendations for books that I can buy my 18 year old daughter for Xmas on the subject of pensions and investments so she can start to understand the subjects? She's young I know but I would like to get her started. Many thanks!
Nicki | Devon | 15/11/2018 | 2
- Robo Adviser
- Online Investment Platforms
- Other
-
I am 35 and working part time on a reasonable salary. I've recently taken out a Stocks & Shares ISA with Wealthify (from reading the recommendations on Boring Money) where I pay in £40 per month. However, I'm wondering if I should be doing more? Should I be diversifying and using more than just Wealthify? Or is it better to increase the amount into Wealthify?
Holly | Sussex | 17/10/2018 | 1
- Stocks and Shares ISA
- Online Investment Platforms
-
I am 25 and starting to seriously financially plan out my future. I would really welcome a 'sense check' on my thinking as well as some help on which investment choices to make. My goals are: To invest for 15 years - my risk appetite is very high (i.e. I could afford to lose all my money). Goal 1 - More Important: To have an investment pot of £1,500,000. Goal 2 - Less Important: To be mortgage free. My plan is: 1) Open an annual Stocks and Shares ISA each of the next 15 years. 2) Open Share trading/dealing account. 3) Reduce my mortgage term to 6 years by 2025. I appreciate the above is a lot to go though, but I'd welcome any help and guidance.
Mo | London | 15/10/2018 | 3
- Stocks and Shares ISA
- Shares
- Online Investment Platforms
- Funds
- Other
-
The recent Metro article which Holly participated in has really inspired me and made me think that investing in shares is something which I would like to do. Unfortunately I am completely thrown about where to start. I would be grateful for any advice you could pass my way. Realistically, I would only have about 2k to invest, so any tips would be gratefully received.
Sarah-Jane | London | 12/09/2018 | 3
- Stocks and Shares ISA
- Cash
- Online Investment Platforms
-
Can I use the Help to Buy scheme to buy a house in Jamaica? Kind regards, Kishana
Kishana | Central | 11/09/2018 | 0
- Lifetime ISA
- Other
-
My wife and I have recently separated. The equity in the house is going to be split 50/50. We don't have any other meaningful assets. We have agreed to co-parent the children equally. My wife is requesting that I pay child maintenance, child care and school expenses. A CMS document states that shared child care results in no child maintenance payments. However, I do agree with the child care and school expenses payments. Our daughter has Autism Spectrum Disorder, so my wife gets a Disability Living Allowance for her and also works full time. If I don't pay the child maintenance, child care and school expenses, my wife is threatening to claim spousal maintenance, and take half my pension. Should I pay the £350/month or take my chances in court?
D | Lincolnshire | 03/09/2018 | 0
- Pension
- Other
-
Any advice for two young people trying to get themselves a home? My girlfriend and I are saving for a house together. Currently house prices in our area are a ridiculous £300k. The max we can get from banks is about £220k, meaning somehow saving up a whopping £80k deposit. This would take us about 8 years (and house prices are increasing faster than we're saving!) That's not to mention solicitors fees, stamp duty, the cost of moving, furnishing the house, white goods, and any repairs or renovations. It all just seems impossible!!
Joe | Buckinghamshire | 23/08/2018 | 0
- Stocks and Shares ISA
- Lifetime ISA
- Cash
-
How can I pimp my credit score?
Sonia | Greater London | 09/08/2018 | 2
- Other
-
I have cash saved in ISAs and savings accounts - probably a 30% deposit on a property - first time buyer. I am at least 12 months away from getting a permanent job, so at least 12 months away from buying a property. What can I do with the cash in the meantime? Best just to leave it in cash for now, or invest a portion in stocks and shares ISAs?
Malti | London | 25/07/2018 | 2
- Stocks and Shares ISA
- Lifetime ISA
- Cash
-
I'm nearly 30 and looking to open a private ready made pension, and also an investment ISA for retirement funds or towards a property, but very unsure what risk level to choose (low to medium, or medium to high)? Any comments or advice welcome.
Susan | WMD | 24/07/2018 | 1
- Private Pension
- Stocks and Shares ISA
-
I am in the very lucky position of just having received a gift of £800k which I want to invest for our retirement. My husband and I are in our late 40s and aim to retire in around five years. We have 11 more years of school fees to fund, then hopefully university fees for two after that. I've put together a plan for us - can you have a look and see if it makes sense?
Fiona | UK | 18/01/2018 | 6
- Private Pension
- Stocks and Shares ISA
- Junior ISA
- Shares
- Cash
- Online Investment Platforms
-
Could you be kind enough to let me know what would be the best instant access savings account for me. I would like any interest to be paid to me monthly. Thank you
Roy | LAN | 17/12/2017 | 2
- Other
-
How do I start investing, buy stocks, bitcoins, etc with £100.00?
Claudette | BDF | 18/11/2017 | 1
- Shares
- Other
-
Have you a review on Halifax stocks and shares isa
Moira | LDN | 21/10/2017 | 3
- Stocks and Shares ISA
-
My mother is 84 and has around £35,000 in cash, realised when she moved to a smaller house. She would like to invest it and draw income that would be slightly higher than the natural yield - say around £2,000. What is the best vehicle for that please?
Ed | SXE | 18/09/2017 | 4
- Stocks and Shares ISA
- Cash
-
I've got £20,000 from an endowment policy (astonishing, I know), and I'm looking into how best to invest to get a reasonable return without excessive risk. Any thoughts much appreciated!!
Penny | Peterborough | 09/08/2018 | 1
- Stocks and Shares ISA
- Cash
- Online Investment Platforms
- Life Insurance
-
Could you be kind enough to let me know what would be the best instant access savings account for me. I would like any interest to be paid to me monthly. Thank you
| 29/05/2018 | 0
- Other
-
Is getting more money on a Mortgage a good way to raise some cash? I have a tiny tiny mortgage on a London property and could do with £50k to spend on other stuff. Would I be better to get the money by remortgaging or borrowing?
Louise | Greater London | 07/09/2017 | 1
- Other
-
What is the H2B ISA and how does it work?
Dylan | Greater London | 07/09/2017 | 0
- Lifetime ISA
- Other
-
How risky is a Stocks and Shares ISA?
Alexandra | Greater London | 06/09/2017 | 2
- Stocks and Shares ISA
-
Should I be even thinking about the stock market?
Lysa | Greater London | 06/09/2017 | 0
- Stocks and Shares ISA
- Shares
-
What is a credit score and why do I need it?
Cameron | Greater London | 06/09/2017 | 0
- Other
-
How much does it cost to make a will?
Sedef | Greater London | 06/09/2017 | 0
- Other
-
Pensions vs ISA - which one is best?
Roderick | Greater London | 06/09/2017 | 0
- Stocks and Shares ISA
- Junior ISA
- Lifetime ISA
- Pension