The Bitcoin Bubble

Yes, it has gone from being worth pennies to being worth a fortune but its value is purely based on speculation and is prone to wild swings.  It is not ‘like gold’, whatever some of its pushers and promoters might want you to believe.  Gold is risky and volatile enough, but at least it is a physical entity with some practical applications, albeit mainly coins and jewellery.  Some will say that governments can’t ban crypto-currencies. Not true. Check out Executive Order 6102, signed on 5 April 1933 by President Franklin D Roosevelt, which prohibited the hoarding of gold coins, bullion or certificates within the continental United States. 

There are many very good reasons for governments to ban crypto-currencies. Cryptos challenge government power and undermine law and order. Those who blackmail computer users by way of ransomware would immediately have their wings clipped if cryptos were banned, other criminals likewise. 

If you want to understand the Bitcoin phenomenon, look up ‘Tulip Mania’ on Wikipedia. Cryptos are the modern equivalent, musical chairs with money based on the ‘last fool principle’ i.e., it only has value so long as some mug can be persuaded that they should want it from you.  Bitcoin is a pure gamble but it is a gamble without even the safeguards that the regulated betting industry provides.  I have not and will not buy cryptos myself, and would not recommend them to any client, even if he held a gun to my head.  (If one did, he would probably have bought it with Bitcoin!) 

Just imagine that I pitched Bitcoin to you as an investment idea for your portfolio.  You being an intelligent person, the conversation would probably go something like this –

You: So, Neil, who invented Bitcoin?

Me: Satoshi Nakamoto, but that’s a made-up name for one or more people. Nobody knows how many, or who he or she or they really are.  For all we know it could be a dodgy foreign government like North Korea out to destabilise the world.

You: So, if I buy Bitcoin, can I use it to buy things?

Me: Sure – drugs, weapons, slaves, child pornography – Bitcoin is perfect if you’re a lowlife criminal scumbag.

You: Er, well, no Neil, you know I’m not.  I meant, like, could I use it to buy stuff on eBay or Amazon maybe?

Me: You might find somebody who’ll take it, but they’d rather have Pounds or Dollars or Euros or whatever.  The problem is that Bitcoin’s price swings wildly, so legitimate businesses prefer real currencies.

You: So, who does use Bitcoin?

Me: Purveyors of the kind of things I mentioned above, plus blackmailers and kidnappers of course.  It’s great for getting payoffs for criminal computer hackers, ransomware types.

You: But it’s like gold right? I read that!

Me: Er, no it’s not.  It’s nothing like gold.

You: But some charities take it so it must be okay, surely?

Me: Sure, some charities will take it, but they’d rather have Sterling or Dollars or Euros.

You: But blockchain will be a useful technology of the future, surely?

Me: Yes, blockchain will be a useful technology, but it does not follow that Bitcoin is a good thing just because blockchain makes it possible.  That’s like saying unrestricted gun ownership would be a good thing because the metallurgy, engineering skills and tools such as lathes that go into the manufacture of guns are all useful and non-harmful in themselves.

You: But I am protected by the Financial Services Compensation Scheme, right?

Me: No, you’re not.

You: Does any government back it in any way?

Me: No, and it’s likely some governments may make it illegal to buy, sell, or even own it.

You: So, Neil, it’s not backed by any government, I might become a criminal by owning it, nobody knows where it really came from, retailers won’t take it and it might even be banned?

Me: That’s right.

You: Well, thanks for the ‘advice’ Neil.  Now I’ll go off and find myself an adviser who’s not insane, and doesn’t think I am. Bye!

Me: Oh dear! Was it something I said?

This is my last word on Bitcoin, which I am sure will please those who own Bitcoin and who want the rest of you to be mugged into buying it as well, so enabling them to sell at a profit. (That’s what’s known as pump and dump by the way; talking up the value of something far beyond its true worth.  You can learn about it here: ) The Internet is full of fake news stories pumping Bitcoin.  Since I started warning against cryptos in general and Bitcoin in particular I’ve been called everything under the sun by people who own them and who are therefore desperate that the con should continue.  Bitcoin is a con in the truest sense of the term.  The word ‘con’ is of course derived from ‘confidence’.  The more confidence there is in Bitcoin the higher its price will rise, despite it having zero intrinsic value.  Those who own Bitcoin are desperate that the rest of you should want to own it as well.  How do I know they own it?  Because they are so vehement in denouncing anyone who points out the truth.  If they truly don’t own it though, and they are so fanatical about it being a good thing, why have they NOT bought it? Why do they NOT have the courage of their convictions?  Why have they NOT put their money where their mouths are? 

If you become a victim of a Bitcoin scam there is virtually zero chance of you getting your money back and you will not be eligible for any help from the Financial Services Compensation Scheme, but somewhere, probably in Russia, at your expense, the scammer behind it will buy another yacht, Ferrari, or house in Belgravia. 

Only criminals need Bitcoin.