This week’s dinner table conversation has been predominately driven by my teenage son talking about Bitcoin. To which my teenage daughter enquires, “Yes, but what exactly is it?” These two viewpoints are common when it comes to Crypto Currencies, as they are known. One is either an avid fan or doesn’t really understand what it is.

 

So, this week’s article will explore and ascertain whether, as an investor, it is time to bank some of your Bitcoin gains in Physical Bullion?

 

Today’s Telegraph runs an article which reveals some interesting facts: “Online searches for information on buying Bitcoin now far outstrip equivalent searches about investing in gold – even at the peak of the banking crisis, when investors feared a full-blown collapse of the world’s financial and banking systems.

The search term “buy Bitcoin” first surpassed “buy gold” as a Google search term in May this year. It is now many times more popular. And according to historic data, adjusted for total search volumes, “buy bitcoin” is currently three times more popular than “buy gold” was during the 2008-09 period which marked the collapse of Lehman Brothers in America and the near-collapse of HBOS and other UK financial institutions.”

Does this tell me that Bitcoin is of more inherent value than Gold, or that people perceive it to be? The two states are different. Everyday people place more value on something of lesser value than something else. It’s all about perception. 

 

Is Bitcoin the future?

 

What exactly is Bitcoin?

So, let’s answer my daughter’s question, which I’m sure is shared by a vast majority of our readers, and ask what Bitcoin actually is. Money Saving Expert and popular commentator Martin Lewis has written a brilliant accessible piece on Bitcoin this week, precisely because he started receiving so many emails asking him if it was a good investment, such as this tweet: “A friend of mine has told me to invest in Bitcoin. What’s your view on them as I’m not quite sure what they are?”

Lewis responds with a simple investment rule for starters: “Don’t put your money into something you don’t understand. Tweets like the one above is what spurred me into realising I needed to write something. My very simple answer is if you don’t understand Bitcoin you should not be investing in it.”

He then briefly continues thatThe idea is that Bitcoin is the most likely payment platform to work with a predicted, but far from certain, blockchain online technology revolution (which the likes of Ethereum and others are also part of). To be created Bitcoins have to be mined and there are meant to be only a limited possible number to be found. The fact it’s a scarce resource leads to the assumption that if demand rises so will the price.” What he means when he says “mined” is it is mined online, originally in gaming! It is not a real thing, so mining doesn’t mean what we mean when referring to say, Gold or a physical metal.

In addition, does it actually have any intrinsic value? A great question. We know Gold does. But what exactly gives Bitcoin its value? Lewis explains: “That’s very difficult to answer – almost philosophical! What is value? Well, food has it, because we can eat it. Yet the primary use of gold, which has been a store of value for centuries, is just for jewellery. Its value comes from its scarcity, uniformity, and the fact many recognise it as a medium of exchange. And then look at our paper money – it has no intrinsic value, but Government validates it so we recognise it as having such. So does Bitcoin have value? Yes, but only because if people choose to accept it as a form of payment.”

Bitcoin isn’t yet accepted in many places as a currency, just as an investment, which was only created in 2009. And ironically and brilliantly Lewis explains that Bitcoin’s massive rises in price in recent months “The massive rise in the speculation price of bitcoin, could actually make it slower or even less likely to take off as a daily currency. People are far less likely to spend Bitcoin when the price is rocketing – they’ll likely just keep hold of it.”

Bleyer’s CEO, Caroline Peers, writes this week that “We’re looking at accepting Bitcoin as a payment method in the future” but that “it’s important to remind investors that precious metals are long-term investments and can be profitable too.” Therefore you need to be prepared and think about your attitude to risk before you consider investing. Its price has risen hugely over the last few years and since the beginning of the year the price has rocketed:

Graph showing the increase in value of Bitcoin since 2013

 

That looks like a bubble and CNBC is by far not the only one to agree, as they wrote within their financial commentary back in September:

  1. Bitcoin is in a bubble, make no mistake.
  2. Bitcoin fails, or is at least suspect, as a currency in several ways: a storehouse of value, a unit of account and a medium of exchange.
  3. When excessive optimism far outweighs normal rational expectations, crashes occur — and this will be the case with Bitcoin. 

But CNBC also conclude that yes, “Can Bitcoin be a transformational, technology-based, currency and be in a bubble at the same time? Uh, yeah!” My son shared a story of the craziness of such a “made up” currency currently becoming worth so much in fiat currency terms. It was of a gamerwho had mined Bitcoin back at the start, for pennies. He stored his “mined” bitcoin on his hard drive, then forgot about it. He then threw out that hard-drive, only to discover how much the perceived value of Bitcoin had risen. He is currently in an unsuccessful battle with his council to dig up his local landfill to try to find his old hard drive. Why? Because the Bitcoins he’d mined in his gaming days are now worth in the region of £55 million pounds!

Having both of these investments could act as great insurance should fiat currencies suddenly let us down. We encourage our readers to thoroughly – and I mean thoroughly – do their research before making any investment.

Gold and Silver are always investments to hold over long periods of time, even from one generation to the next. They are solid precious metals of intrinsic value. You are not likely to through them away with your old computer! We treasure them precisely because they have been treasure for so very long. To invest in Physical Gold and Silver as a store of your wealth, call one of the Bleyer team today on 01769 618618 or email sales@bleyer.co.uk

 

A couple of physical Bitcoins standing up

Search
Generic filters

Academy Archive

Spot Prices

    Gold£41.85
    Silver£0.54
    Platinum£23.78
    Palladium£50.03