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, your 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!!).
Time for a tongue in cheek “Crypto Special” after all if I couldn’t laugh about this I’d cry!! CLICK HERE for the Crypto Diaries if you want the full experience.
This special also acts as a distraction from Rishi “Dead Man Walking” Sunak and the fact I can’t afford a courgette these days….
My sorry tale starts in November 2021, when “everyone” was into Crypto. You could not move for people harping on about how much money they had made in crypto. This was the first alarm bell I ignored – a strong consensus in favour of something unproven is likely more akin to the madness of crowds / greed than it is a paradigm shift and a good idea.
I went forth boldly and decided to bring to bear (at that point) my 31 years of study and experience of investing – that should amount to a lot of nous and cunning, shouldn’t it? This was alarm bell number two – I should have fully comprehended this was not investment but a speculation.
I wasn’t buying anything that would produce anything (an investment) I was buying something where I hoped the price would move in my favour and I could sell it at a profit (a speculation). Crypto does little of any use compared to a BP or Sainsbury’s or an Amazon or Microsoft. Those companies make profits to share with their owners (you) and pay corporate taxes, employ millions etc.
Crypto is the wasp of the financial world compared – they do little other than sting you and laugh. The great companies of the world are like bees in comparison, they pollinate (essential to all life on this planet) and there is the added bonus of honey.
I have investing nous after 31 years, but no speculating nous as various bookmakers and casinos can attest.
So, with alarm bells ringing (they are really off-putting when you are trying to focus) I took the plunge and bought just a little bit of quite a few different types of crypto. Or different named at least. Who knows how different they are? How can you tell / understand fully before buying? Caveat emptor.
Crypto is crypto like an engine is an engine, except it isn’t really, is it? There is quite a difference between THIS ENGINE and THIS ENGINE (a bottle of bubbly or similar to the first who can tell me the make and model of the cars they came out of). I still can’t tell the difference between one crypto than another though because lifting the bonnet does not really help.
With buying a bit of quite a few cryptos I thought I was diversifying as we do with buying companies all over the globe in all different sectors and of different sizes. The performance figures to date suggest that I had diversified very little – that’s because crypto is crypto, the ability to diversify is severely limited in the same way as if all your investments are in utility companies or buy to lets – when those markets get hit you get hit bad.
True diversification is different things that are unrelated to each other, in different sectors and countries. Alarm bell three was therefore the misapprehension that I was diversified when I was not really.
And so, I wound up being the owner on 27 different cryptos, doing very similar things as we shall see.
I did have the good sense to add a bit each month, and to limit my overall exposure, but ultimately I had walked myself into (and am now stuck in) a speculation in a very narrow filed, that no-one truly understands, that can’t truly be understood and was completely unregulated.
In short, I had set myself up for a good fleecing. And that is exactly what I have got.
My speculations are worth 37% less than the money I put in and have never been worth more than I paid for them. Digging into the performance a little further and things go from the sublime to the ridiculous….
- 21 out of 27 are worth less than half I put in.
- All but 3 are down 40% or more.
- 8 out of 27 have lost 80%+ of their value.
- The worst performer is down 98%.
- The best is down -2.70%.
- Only 2 are down less than 10%.
That is quite spectacular, isn’t it? Many, many people have experienced something similar. Thank goodness I limited my exposure; many will not have.
So, there we are, over 18 months I have succeeded in tying up a not insignificant amount of money in something I did not properly understand whilst ignoring several alarm bells.
I would say that I have got my just desserts!
Better me than you!