Weekly update - The tale of Bitcoin and the dinosaur

My family sometimes affectionately call me Dave the Dinosaur. In fairness I can be a bit stuck in my ways, partly to do with the way my brain works, my upbringing and the set of values I have evolved during my life. This is true in both my personal life and also sometimes in the more cautious way I think through investment decisions.

In 2013, four years after Satoshi Nakamoto launched Bitcoin, my then 19-year-old son tried hard to persuade me to invest in Bitcoin. At the time Bitcoin was trading around $1,000 and Sean had invested the princely sum of £1,000. He waxed lyrical about the money he would make over coming years as Bitcoin became mainstream.

Whilst I understood what Bitcoin was (a digital token given for processing and verifying transactions powered by Blockchain) I did not understand the purpose of it in the world that we live in.

Bitcoin was being referred to by many as money, but for me it didn’t fulfil a number of the fundamental requirements of money. Whilst it was a medium of exchange the reality was it wasn’t accepted anywhere that I spent my money, so if I wanted to spend my Bitcoin it would involve converting into pounds. Likewise, I wasn’t convinced that it would be a good store of value. You normally seek stability in the value of your money whereas the price of Bitcoin seemed to have wild swings in value.

Unless the goods I was buying were priced in Bitcoin, I personally wouldn’t want to be paid in Bitcoin as I could not tolerate the vagaries of my spending power rising of falling 25% from month to month. Furthermore, whilst major currencies have not been backed by silver or gold since the end of the Bretton Woods Agreement in 1971, I took some comfort from the implicit guarantee of the governments issuing major currencies such as USD, GBP etc. In contrast I could not see any implicit guarantee underpinning Bitcoin and I couldn’t see any intrinsic value in the digital token that is called Bitcoin.

Chart showing price history of bitcoin from 2010 to 2024

Source: Investopedia


It seemed to me the digital currency was designed to facilitate transactions between parties that did not want the transactions to be visible or monitored. In essence a currency to facilitate economic activity outside of or in violation of the prevailing laws and regulations of society. With this mindset I did not expect Bitcoin to become popular as a payment source for economic activity outside of activity on the dark web. This left me with a moral conundrum should I be investing in something that encourages illicit activity?

I also thought that if Bitcoin became mainstream it would eventually be killed off by governments and regulators writing laws to curtail economic activity that took place outside of their sight as they couldn’t enforce their laws or generate tax revenues from that activity.

Another significant issue for me was I had no idea how to value Bitcoin, so I could not work out whether it was cheap, expensive, or reasonably valued.

Over the 40+ years I have been investing there are rules that have been drummed into me by my mentors that have generally served me well including: -

  • if you don’t understand it don’t invest in it
  • if you can’t value it don’t invest in it
  • if you decide to proceed, be honest, call it a bet and position size appropriately

As you may have guessed Dino Dave didn’t invest in 2013 and at the time of writing the Bitcoin price is roughly 69 times what it was when I received the original advice to invest. My son, Sean, invested, he has taken his original stake out a few times and still has Bitcoin valued at many times what he originally invested. He was also 90% down at one point and has on more than one occasion seen the value of his investment halve.

Every year Sean and I revisit our 2013 conversation, nowadays Sean is 30 and works for a hedge fund. He tries to assuage my inability to value Bitcoin by telling me there is no need to value Bitcoin and instead I should look to trade the volatility.

At work we operate an investment decision review log whereby we revisit investment decisions one, three and five years after they were made to see whether we were right or wrong and if we were right whether we were right for the right reason or right for the wrong reason.

Whilst not investing in Bitcoin when my son advised me to in 2013 is probably the worst investment decision I have ever made in my life, when I run through my decision log, I wonder whether I was wrong for the right reasons? The concerns I had in 2013 seem as valid to me today as they were when I originally decided not to invest.

  • My confusion around Bitcoin’s place in our society remains
  • The recent conviction of Jian Wen has heightened my moral conundrum around whether its right to invest in something that encourages illicit activity
  • I can’t discern any intrinsic value in Bitcoin
  • There is no guarantor standing behind Bitcoin
  • I can’t value Bitcoin so I have no conviction whether the next price move is up or down

For me personally, for the reasons stated above, Bitcoin remains uninvestable. Some people have made and are making significant amounts of money from holding, investing in and trading Bitcoin. I wish them well but I would urge taking profits from time to time and position sizing to ensure that if/when it has another collapse it doesn’t impact your lifestyle or cause you sleepless nights.

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