Should I Buy Bitcoin?

on 13 February 2018

The short answer is no! However, we thought it might be useful highlighting the reasons why you should think very carefully before investing.

Firstly, what is Bitcoin? The technical name is it is a cryptocurrency and worldwide payment system. Unlike normal currency there is no central depository like the Bank of England, and no regulated entity issuing the currency. Bitcoins are mined, but not like Gold and Oil, but with a computer programme. There are a limited number available of 21,000,000 and at the time of writing there is around 16,000,000 in circulation. Many believe a transaction fee free, digital currency is the future and this is one reason the price is being driven up.

A recent article from Martin Lewis stated that Bitcoins were similar to stocks and shares, we disagree completely. When an investor purchases a share, they purchase a piece of the company. They do this largely because they believe the business will either remain or become profitable, and provide a return by either paying dividends or growth in the share value. This is not the case with Bitcoin, when you purchase a Bitcoin you are speculating that in the future others will be prepared to pay more. It’s a currency which isn’t regulated and manipulated by central banks and government.

The characteristics are far more aligned with a currency than a share. Let’s take the good old British Pound. The value of one pound is based on trust, on the knowledge that you will be able to continue to be able to take your money to a shop and exchange it for goods.  They also present a real opportunity for money laundering, tax evasion and other illegal activities. What would happen if governments looked to restrict or even ban the use and sale to protect their own revenue streams? And finally what happens if you, or your Bitcoin wallet is hacked and they are moved to another account, it’s irreversible, you will never have you money returned.

No such controls exist with Bitcoin. You can use it to purchase goods and services online, but it’s not widely accepted. What would happen if these outlets stopped accepting them, the value would tumble. But far more worrying is, what will happen when the man on the street gets nervous and wants to withdraw, there won’t be any central bank that helps prop it up, it will fall fast and hard.

Could Bitcoin hit £100,000? Yes absolutely, is there any strategy or logic behind it’s value, none whatsoever. Is digital currency the way forward, yes probably. However, we don’t believe the powers that be will allow that to be an unregulated or controlled product.

If you have a few hundred quid, that you can afford to lose, by all means be our guest, but don’t say we didn’t warn you.

This article is for general information only and is not intended to be individual advice.

You are recommended to seek competent professional advice before taking any action.

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