Crypto and other digital assets are completely unregulated and can be hugely damaging to your wealth. Complete loss of your entire investment is a very real possibility. If you cannot afford to lose it, you cannot afford crypto. Crypto assets come in all shapes and sizes, are massively risky and volatile for multiple reasons. Nothing you read below should be taken as a recommendation to buy crypto, in fact quite the opposite (but that’s not a recommendation either!!).
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17/11/21
I met up with a friend, former colleague and fellow financial planner, we started talking crypto.
I can’t say I was much the wiser.
I did, however, decide to experiment and share my experiences with clients.
18/11/21
Step one, I set up an account with Coinbase
Step two, I became completely overwhelmed by the choice of crypto things to buy.
There is way more than just “currency” (as far as I can tell), this is no ways simple.
Nor is it easily understood.
I decide to put £100 each into Bitcoin and Ethereum because I have heard them.
What to do about all the rest?
19/11/21
I have decided that the best I can do is pick 25 randomly and see what happens.
I start putting £20 each into random crypto things.
I’ve read the short summaries of these things; they mean nothing to me.
This is 100% unabated speculation.
20/11/21
Crypto clearly doesn’t bear comparison or equate to anything else you can put your money in.
Already values are whipsawing around.
I guess some of these will go to zero.
I have committed £700 total.
21/11/21
The costs of buying and the markets going down mean I am showing a 30% or so loss.
Values change dramatically minute to minute.
There’s no way of knowing why or how.
In fact, how do I know that I definitely own what I think I do? It’s not like there’s a share register to inspect.
This is all on trust as far as I can tell.
22/11/21
As it’s 100% trust based then I must limit the total amount I put in.
That can be viewed indifferent ways, but a good starting point is “If it all went to zero what the maximum, I’d be willing to lose?”
£2,500 maximum.
23/11/21
Back to that subject I plan to “insure” myself by withdrawing original capital as soon as values are up substantially.
I need a proper measure though.
I’ll watch and see what comes to me.
24/11/21
So, if I get all my original capital back at some point, the remaining balance is free or “house” money.
Even still, if that gets to £X, I don’t cash in, and it collapses I’ll be pretty gutted.
And if I get out at £X and it soars to £Y I’ll be even more gutted?
This is the thing about individual holdings – we lose our nerve and can’t stay in the game, at some point we feel we have to get out.
It’s the same reason that nearly no-one has benefitted from the full 28,000% increase in Tesla shares since they started in July 2010 – the gains would have been so overwhelming way before today we simply couldn’t ignore them.
This is going to be emotional.
25/11/21
So, what is my £X? a decent holiday? My next car? A house?
I have settled on a total outlay of £3,000 over the next 12 months.
I’m adding no more until mid-February just to get a feel for what’s going on.
There’s no science to this, just feels like the right thing to do.
30/11/21
I’m trying to get my head around how crypto is being funded.
To buy it you need cash (in the main) and when you sell it you get cash back to use.
So, to my way of thinking, crypto is transferring cash from one person to another.
i.e., nothing is being created?
01/12/21
Whichever way you cut it the world of crypto is completely unregulated with no oversight.
There is no investor protection of any sort.
We do not experience this (in the UK at least) in any other area – travel, energy employment, pensions etc. etc. are all overseen, there are rules to be obeyed, compensation schemes in place when things go wrong.
It is exceedingly rare for there to be no recourse to anyone for an investable asset.
This undoubtedly makes it attractive to crooks and scammers.
At some point we will become aware of people being ripped off – stories will appear.
Caveat emptor.
02/12/21
Broadly speaking crypto is a zero-sum game.
Which means one person’s gain is another’s loss.
In crypto’s current format you have to be sure you will be consistently better than the person at the other end of the deal.
That’s highly unlikely.
In due course I imagine there will be pooled ETFs and funds etc. where investors can easily and cheaply gain access to a broad range of crypto assets.
That’s not the case now so picking individual cryptos and hoping for the best is what’s available.
06/12/21
For the last couple of days all 27 holdings have been taking a bath – their prices have plummeted.
£700 “invested” (spent?) 18 days ago is now valued at £530 – a drop of 24%.
07/12/21
I read these couple of articles with interest. I subscribe to Ben Carlson’s updates, I don’t always agree with what he says but I can’t complain that his views aren’t thoughtful, intelligent and well laid out:
Risk & Reward Expectations For Crypto does what is says on the tin, I’ll read it again and see how it affects my thoughts about my strategy.
Wealth Management Money is Coming For Crypto outlines the nascent efforts by the wealth management industry to make crypto more accessible / organised / useful as a portfolio component. Perhaps the biggest message here is that crypto is starting to gain a veneer of respectability – if the big banks / fund providers want in they believe it’s here to stay and there’s money to be made.
Everyday there’s more to understand which behoves a softly, softly approach I believe.
Crypto will have to go through all the growing pains, scandals, scrutiny and evolution that the stock markets did. Those stock markets represented the same “wild west” 100+ years ago that today’s crypto land does.
Soaring highs and crushing lows will be the order of the day for some time to come.
11/12/21
I think there has been a significant development in my thinking.
Crypto is and will remain a sideshow, it should not become the main attraction, it can’t and won’t lead to untold riches in the same fashion backing continued global economic growth has done and will continue to do.
I believe the only way to profit in crypto land is to trade your way in and out. The volatility in the prices is incredible. Every day at least one of the holdings is up or own by double digits assuredly a speculator.
Or, in simple terms, I am having a bet. And if I’m betting I can add discipline to what I’m doing. So, from today I will:
1. Buy a little more of any of the 27 holdings once the price has fallen 30% from the average I paid, to buy low when the opportunity arises.
2. Sell if I can get double my stake back, this leaves me with a “free” bet going forward.
3. Only check the holdings once a week, to avoid temptation.
4. Delete the Coinbase app from my mobile, to avoid temptation.
5. Add a level of security making it impossible to look at my Coinbase account from my mobile, to avoid temptation.
15/12/21
Today, near as damn it, is one month since I first bought some crypto assets.
I have bought more as per the discipline outlined below (i.e. when any of them are down 30% or more) but not had the opportunity to sell anything.
Currently my crypto assets are worth 17% less than I paid for them. If that trend continues for another 11 months then I will have lost 90% of what I paid over one year.
That’s both unlikely and quite sobering. Who is to say that won’t happen? Who knows? Absolutely no-one.
In other news the Advertising Standards Authority has banned “‘misleading’ and ‘irresponsible’ crypto ads” CLICK HERE to read more.
Which is a timely reminder that we should be very, very, careful of where we get our information from.
Be in no doubt that the malignant, self-interested sources massively outweigh and have bigger budgets than the benign and helpful.
22/12/21
Not much report on the face of it today. In total my crypto assets are worth a bit more than a week ago. Now the are down 14% rather than the previous 17%.
The graph showing progress over the last week indicates a 7.5% difference between the high and low water mark in the last week, with the week ending on a high.
But not enough has happened overall to necessitate further purchases or sales.
It will be interesting to see what happens over Christmas – I would be surprised to see some mass manipulation (wild swings) caused by a few “players” while the rest of us have taken our eyes off the ball with family and other matters to tend to. Let’s see.
29/12/21
It’s an obvious statement but an important one.
Not having the crypto app on my ‘phone means I rarely wonder what’s going on with my crypto until each Wednesday when I author a few notes.
This lack of activity results in temptation being eliminated which makes it much more likely I respond rather than react each week. In the long term responding is always better than reacting if you’re trying to build wealth.
And the response this week is….(almost) nothing doing. Prices haven’t moved enough to trigger a buy or sell, my account value has been up and down as much as ever.
My musings from 11/12/21 have proved to be helpful, but they do need a tweak.
The tweak is on the first Wednesday I will add to my holdings in the two crypto assets that, as far as I can tell, are most likely to survive long term. Namely Bitcoin and Ethereum.
Don’t ask me why, it’s not even a hunch, just responding to what seems like a sensible thought to me. And I’m not talking about piling on, just adding consistently for all of 2022 and seeing where we are then.
As at the date of this update my crypto assets are worth “just” 7.3% less than I paid for them, my losses have been halved in a week.
05/01/22
An odd week in cryptoland. My collection of 27 crypto assets barely moved throughout the week, it was completely becalmed. That’s a first.
12/01/22
It’s been a bruising week in cryptoland. The total loss on my account is now 18.5%.
10 (out of 27) holdings have dropped so far I have made a further purchases.
A conversation with a client (who is an investment trader by profession) was interesting. His views, based on his dabblings, are as follows:
· Only buy on strength and get out very quickly should it go against and break expectations. It’s too volatile an asset to risk acting otherwise.
· Right now we are in no-mans-land, near the bottom of a recent consolidation phase.
· Buy again should it move above recent highs.
· Should it break below recent lows it could be a sell.
· Caution though as there appears to be more institutional money moving into various crypto assets which could win the battle like it did during 2021.
· Crypto has definitely become a trading asset rather than investment asset.
· It will be more investment friendly in the near future, still a very young and immature asset.
Which I condense in my thoughts to the following:
· Crypto is a market for trading as opposed to investing.
· You need eyes in the back of your head.
· And unfailing discipline.
· And razor sharp reflexes.
And given that most of us have jobs, families, friends etc. that’s one hell of a commitment to have to make.
You’re taking your life in your own hands.
19/01/22
The losses have continued for the last week, my investment is 21% down in total.
The losses on some were such that further, small investments were made. This has inspired two changes to my approach to crypto, as follows:
1. I will limit myself to three separate investments in crypto assets (other than Bitcoin and Ethereum).
2. I will now only check what’s happening and update this blog on the first Wednesday of each month.
02/02/22
My portfolio is worth 30% less than what I paid for it. Not dissimilar to the “Covid Crash” of 2020.
I wonder if the recovery will be as swift?
Further losses have triggered multiple purchases. I have reached my limit of three separate purchases on several of the crypto assets now.
Let’s see where we are in a month.
Since I last posted Russia has invaded Ukraine. It is not until today that I have checked how my crypto portfolio reacted. And the answer is that it tanked 18% over
two days before recovering somewhat to leave values where they were about a month ago, which is well down on the total invested to date.
So the “alternative investment” that is crypto reacted in exactly the same way as the mainstream equity markets, only more so. Not quite the diversifying / uncorrelated asset itis purported to be is it? Not that I am surprised, in crisis just about all assets react in the same way. This was clearly seen during the financial crisis.
The difference between mainstream equities and crypto is the ability to clearly see what is going on, who the runners and riders are etc. Being shrouded in mystery and opaque has many advantages for many investors, but none of them particularly wholesome. That context is often lost on mainstream investors who are generally attracted by the shiny bright lights of big returns and the ever changing narrative that keeps them in the game.
Today I added to both the Bitcoin and Ethereum holdings as per the revised strategy to add the same amount each month. I have bought many of the other 25 holdings three times already so won’t be adding to them regardless of price movements.
06/04/22
Much like the mainstream stock markets my crypto assets have recovered some of their value – they are now down only 10%.
I bought some more Bitcoin and Ethereum, as I will each month.
Out of the other 23 crypto assets I own, 19 have been bought three times and won’t be bought again. The other four were not bought this month. All but three of the holdings are worth less than I paid for them.
May will be 6 months since my first purchase. It seems clear to me I won’t be making a quick killing! No matter, that’s the nature of speculation.
Coming across the newswires in the last month has been plenty of stories about regulators looking closely at cryptocurrency. This was inevitable. Our own FCA has written to all financial advisers and planners reminding us of our “existing obligations when they are interacting with or exposed to crypto assets and related services”. The FCA are rarely ahead of the curve, my intuition is that they are seeing things happening in IFA firms and getting twitchy. Expect more from the regulators.
Here’s a link to Reuters’ article on the Bank Of England’s nascent attempts at a regulatory framework: https://www.reuters.com/business/finance/bank[1]england-sketches-out-regulatory-approach-crypto-2022-03-24/
04/05/22
I can’t tell you how bored I now am of crypto. It has only taken six months. It is not a good thing to be bored of something like this. I see nothing new month to month, no way of discerning what might come next. Not when compared to the real economy at least, I have no feel or feeling about crypto assets.
In total my crypto assets are worth 30% less than I paid for them. This is dead money as far as I am concerned. I suspect the value will recover at some point but I have no idea when.
Despite my lack of enthusiasm I have stuck to my plan and added to Bitcoin and Ethereum as I said I would every month. I also added to another holding as it has now performed so badly I can buy it at 40% less than the previous purchase price.
I saw an article on crypto recently https://www.gov.uk/government/news/government-sets-out-plan-to-make-uk-a-global-cryptoasset-technology-hub
You may or may not find it interesting.
See you next month.
01/06/22
The rout continues. My “investments” in crypto currencies are now worth 47% less than I paid for them. If these were “real world” assets this would give me little concern – I know the companies that I own will continue producing goods and services at a profit and eventually their values will rebound. In this opaque, blockchain, unreal world I have no such assurances.
Over the last 12 months the “value” of Bitcoin has doubled and then halved. I use the term “value” as loosely as possible. Who can possibly know what the value is? The price of Bitcoin simply reflects what people are willing to buy and sell at. That price used to be a lot higher than now.
I could sit in the corner and sulk I suppose, but I don’t like wasting my time like that. I’m reconciled to the fact that I have bought some stuff that is worth less than I paid for it. I’ll mostly ignore it now, add the last few quid I allocated to this experiment and see what happens.
The real investments I make, every month through pensions and ISAs where I become a bigger and bigger owner of around 8,500 excellent companies that do real things in the real world for real people who really want to be successful, give me the comfort (and compounding returns) I seek.
Come what may they will always have my back. In the meantime crypto is little more than the wild west where sharp operators make fortunes from the unsuspecting public.
Nick Maggiulli, a US financial planner, posted THIS EXCELLENT ARTICLE of his own experiences. I suggest you read it.
And then there is THIS from the Cato Institute, for all you hardcore libertarians out there.
6/7/22
What can I say? A hair-raising 47% loss has become a mind-blowing 62% loss. The good news is that this paper loss does not cause me to miss a step in my monthly and longer-term obligations. I knew from day one I was in a casino and that this could happen. On that front, the other vaguely good news is that I still have some of my stake left!
But it has got me thinking – what’s the future for crypto? Does it even have one? As a medium of exchange? As “digital gold”?
It’s not functioning as either currently.
Maybe it will only ever be a billionaire’s play thing? Or perhaps, like many innovations, it’s just struggling to find its place in the world.
Anyone purporting to “know” the future from crypto should be given a wide berth. A very wide one – nod, smile and look for the exit.
This month’s further reading:
“The fire burning beneath crypto’s meltdown” from the Wall Street Journal
and
“Too good to be true” from Nick Magguilli (scroll half way down to get to the crypto bit).
3/8/22
I am on holiday in north Norfolk. It’s beautiful. I couldn't care less about crypto this month.
7/9/22
I am now back at my desk, attempting to raise myself from my catatonic crypto state.
During the last few weeks a client and I shared some thoughts about crypto.
My own observations were as follows:
Crypto used to like to think of itself as a currency / medium of exchange but now seems to think of itself more as “digital gold".
Is crypto a moody pre-teen unsure of its place in the world? Or perhaps just a financial plaything for multi-billionaires to dupe the masses? Who knows?
What has been interesting is the degree to which the rise and fall of crypto appears to be following the rise and fall of stock markets – there appears to be a correlation. It doesn’t smack as any sort of “store of value”, not to me at least.
We then talked about reserve currencies and whether bitcoin could be one.
My thoughts were:
As for Bitcoin? It’s up in its bedroom painting the walls black while playing thrash metal at top volume. Unsure of itself and its place in the world and craving the attention of the adults downstairs but going about it in all the wrong ways. One day, out of the blue, it strolls downstairs, washed, well turned out and coherent and goes off to work.
Will we see that day?
“Dissent Is A Part Of Crypto” fleetingly held my attention. Other articles that have passed before my eyes seem to be squabbles over regulation and fees. I guess the squabbles are further proof of crypto maturing?
And now for the bit you care about most….
Since I last checked my crypto holdings (start of July) are up a raucous 32% but, alas, they are still down 52% overall.
My most spectacular loser is down 91%! I have only one holding worth more than I paid for it. It is up 6.85% but it is only 1% of the entire portfolio.
5/10/22
Nothing much to say here for this post.
I have added to one holding for the last time because its price had slipped far enough to warrant it as per my previously published rules somewhere above.
And I added the usual amounts to Bitcoin and Ethereum.
There is little change in values from last month. The holdings are now down a total of 53%.
02/11/22
It’s a year this month since I first bought some crypto having met a friend and fellow financial planner for lunch. I wonder what would have happened if my tube or his train had broken down and the lunch hadn’t happened.
In a way my experience and this blog is all his fault. Perhaps I should seek damages.
No new thinking is coming to me about crypto, which is telling in itself. I’m neither disappointed nor excited about it in the same way as being the owner of real businesses doing real things that people really want – that seems an altogether more ethical way of investing.
The “good” news this month is that my crypto holdings (I refuse to call them investments as they are inert) have recovered to such an extent that they are now less than 50% down.
Wooo!
07/12/22
I have now invested all the cash I am prepared to commit to crypto. Over the course of 12 months my “investment” has lost 58% of its value.
There will be no more posts on this, until crypto has achieved the only two things that would be of any note – complete implosion or returned a profit.
What was a bit exciting and interesting in the beginning is not any more. In fact it has been one long year of misadventure which has culminated, appropriately, in one of the biggest financial frauds of all time.
Crypto promised and made great fortunes for many people apparently. Personally I know no-one who has made a fortune from crypto and I know no-one who knows someone that has. It does not mean it’s not true though. It just is not true in my circle or probably yours.
In the last month the FTX scandal has broken. There will be more.
One day, not so long ago, Sam Bankman-Fried woke up “worth” $16bn by bedtime he was worth $0. That is some achievement, of course he was never worth $16bn, $0 is a much more accurate figure.
Mr Bankman-Fried has perpetuated one of the biggest frauds ever know to man. He appears to have “reached the top” in the usual way for fraudsters – by praying on the stupidity and incredulity of humans. You can read more about this latest, colossal financial fraud HERE. And for historical comparison read THIS ARTICLE comparing Mr Bankman-Fried to Ivan Kruger in the 1920s.
We are so desperate to believe a good story that we overlook the simplest of things. In this case (and in many before) a simple look at the make up of Mr Bankman-Fried’s business – very few directors with next to no experience – would have sent any sane investor running for the hills.
Once again people either didn’t do even the most basic of research or they did, ignored this clear red flag and chose to believe the pile of pap Mr Bankman-Fried spewed.
On a wider scale the allure of crypto – quick, easy riches – led us all to spend money on something that we do not have faintest idea about.
Will we ever learn?
No. Never.
16/11/23
It is now nearly a year since I updated my adventures in cryptoland. Not that there is much adventure left in this journey. It feels like a long hard slog now. I dream of the day I might have a profit to show for this.
Over the last year I have lost all of the small amount of interest I had in crypto. About the only thing that caught my attention was Mr Bankman-Fried’s guilty conviction. He can expect to be inside for a very, very long time now – and rightly so.
Value wise there has been progress over the last year. From being 58% down this time last year I am now merely down 23% over the two years I have held crypto.
That improvement has come mostly in the last month. In mid-October I was still 40%+ down.
Woe is me. The trials and tribulations of speculating rather than investing. I speculated to make a quick buck that would not really have changed my life. Instead I have so far lost a quick buck that equally has not changed my life.
But that’s not the case for many who committed large sums to crypto only to get caught out horribly. I imagine most have fled the field of combat thereby turning a paper loss into a real loss.
07/03/24
As you can see it has been 16 weeks since I last posted about my crypto experience. And what a 16 weeks it has been.
Since mid-November my crypto holdings have increased in value by 68%. On 14 February this year my crypto holdings, after 26 months in the wilderness showed a profit for the first time. Today my crypto is worth 30% more than I paid for it.
And so crypto, like most other assets spent the best part of two years in the doldrums before coming to life more recently. It just did it more violently than mainstream assets – the downs were deeper and the ups have soared higher.
Which is to be expected because greater rewards come from accepting greater risk. But so do greater losses. In % terms at least.
In £ terms it is different – who can afford to commit a serious % of their life savings /pension pot to such an opaque, volatile and untrustworthy investment? I certainly can’t and so I didn’t and so, although a good % return has been made, the cash return is enough for a decent weekend away, but nothing more.
Was the rollercoaster ride worth it? Who knows, it always a bit of play money. It is gratifying it is in the black now, but until it is showing a £ return that moves the dial for me it’s really not that relevant other than as a plaything.
This is still no love supreme, not for me at least.
Everyone is in a rush and there’s really no need to be.
Just make sure you have set off in good time.
01/10/24
It’s almost three years since I started “The Crypto Diaries” and I am now officially lost for words. Apart from these few.
Crypto is here to stay but will not “change everything for ever”, the hyperbole and speculation will die down further and crypto will become more and more part of everyday life.
It won’t bring down Governments, it will grow up and behave itself and find its proper station in life.
This will, therefore, be the last entry for a long while. Unless something incredible happens that is.