One of the great things about the Christmas and new year break is being able to relax away from the market and reflect on the year gone by. Bitcoin was the hot topic for 2017, particularly in the second half.
Let me be clear. I'm bored of bitcoin already.
I'm bored with the influx of LinkedIn requests I'm getting from cryptocurrency traders I have never met and I'm bored of explaining how useless all cryptocurrencies are and how you're better to actually buy real businesses that make real profits.
But 2017 felt like the year that everyone I knew was asking me about bitcoin.
I went for a walk with a friend who had invested $20,000 six weeks ago into a basket of different currencies and that balance six weeks later was close to $60,000.
A cabbie was telling me that he was a cryptocurrency trader and that driving the cab was no longer his full-time job. My brother-in-law had told me that his builder had borrowed $400,000 against his house to buy bitcoin, an old analyst of mine owned some type of cryptocurrency and the millennial sitting next to me at dinner was telling his date how he had invested $5000 a week ago and it was now worth $10,000, continuing to check the balance every few minutes and show her.
So for all of those people asking my opinion on bitcoin and other cryptocurrencies, I'm happy owning Aussie dollars and paying my bills with it.
Find real value
When I start to see retailers accepting bitcoin or utility companies accepting it then I will believe that it's not just a quasi-ponzi scheme, selling something that has no value. It's a currency that doesn't do anything, is not backed by any sovereign nation, is not accepted anywhere, is hard to buy and sell, and has no fundamentals supporting it.
So here's my answer to anyone who asks me what to do about bitcoin: lock in your profits and think yourself lucky that you have made a profit in the greatest bubble in recent times. Then go and put your money into a real business that makes money.
Given the peer-to-peer nature of digital currencies and the potential for money laundering and tax evasion, longer-term on a fundamental basis there are still huge legislative risks for any corporate looking to invest in rolling out the technology on a mass scale, so I don't see Visa or Mastercard rolling out the technology anytime soon.
I own a small handful of businesses that I know well. They are real businesses that make real cash profits. I can't understanding buying something that cannot be used anywhere.
I get paid no interest on digital currencies and I can't use them for anything other than to sell to someone else. I would rather have my investments in the form of businesses that are growing or businesses that make real cash profits. As I always say, if the market was to shut down and I couldn't sell my investments I would need to own some businesses that pay me a dividend so I can put food on the table.
If the digital currency exchange shuts down and all my wealth is there, it is going to be hard to put my bitcoin in my wallet and pull it out at Woolworths to pay for my loaf of bread. It's hard enough finding somewhere to use an Amex card.
By Michael Glennon is the founder of Glennon Capital.
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