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What’s going on with Crypto?

A year ago, I invested $1,000 in bitcoin. Today, that’s worth $10,000.

OK, I made those figures up. I actually invested and have invested and keep investing in bitcoin and, more importantly, ether – the currency of Ethereum – in which I have more confidence for the future. I don’t sell them – HODL guys, HODL – but the last year has been interesting. In March, a $1,000 invested would be worth $10,000 today so, the bit I didn’t make up there is the multiples.

I have a good memory and remember buying some bitcoin when they were $60 each. Now they’re over $30,000 and nearing $40,000 each … oh and now nearing $30,000 again.

I have a bad memory: I invested $1,000 in bitcoin when they were $60 each, but left them on Mt.Gox as a value store and then Mt.Gox disappeared and lost them. They would have been worth almost $600,000 today. Whatever.

Q: What’s going on?

A: Banks have woken up to cryptocurrencies.

JPMorgan Chase are predicting bitcoins will break $146,000 per coin in the long-term whilst a Citibank analyst has predicted over $300,000.

Meantime, I’m sitting here and wondering: has the world gone to pot? Or, rather, is the world smoking pot?

I can completely understand why people are buying bitcoins and ethers as, whilst we are in crisis and lockdown, they think it’s an investible asset. Digital gold. Amazing.

But when reality returns, there’s also a huge likelihood of a massive sell-off and removal of investment in what bankers have called a Ponzi scheme for the last decade.

Now, this is where it gets weird: it’s a Ponzi scheme and has no backing, asset or governance; it’s an investible asset, and everyone is getting a piece of the action. In fact, the real bottom-line here is that bankers are making cryptocurrencies respectable, as I blogged recently.

But then you have to come back to the truth: money is just a construction; Countries are just a creation; Governments and companies don’t exist; and your life is a blue pill (see Matrix).

As I watch the surreal rise of people who want bitcoins – most of my friends who have no idea what it is or why they want it – I see a world that is delusional, mad and strange. Sure. I’m commentating as someone who hasn’t left home for a year, near enough – so maybe it’s me who is delusional, mad and strange – but it is interesting to watch the madness of crowds as they rush towards crypto with no idea of why.

And get this guys: it is the madness of crowds.

When a currency gains ten times more value in less than a year, it’s madness. But it reflects the views of the crowds during lockdown. During lockdown, we don’t trust our governments anymore and, as a follow-on from that, we don’t trust our government’s currencies. We don’t trust our government’s money. We don’t trust our government.

The combination of bankers starting to endorse cryptocurrencies as respectable and governments losing citizens support creates a perfect storm for bitcoin and its brethren to yes, probably gain value over the next year of a major multiple.

My view?

Put your money into crypto via companies like Mode, keep it there for as long as you can or, if you have time on your hands, buy low and sell high. Either way, you’re going to have a good time making money whilst this rollercoaster ride continues. Just make sure you’re not still sitting in the chair when it all stops or crashes.

About Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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