I could have made 185% on bitcoin. But I'm still happy I sold

Times

a day ago

It's quite rare in life that you get to witness what might have been. You will never know if you would have been promoted at the company that you left, how a relationship might have worked out if you had stuck with it, or whether studying for that master's degree would have improved your career trajectory.
In the world of investing, though, you can see exactly how things would have turned out. It's easy to track the movements of the share price of a company or fund after you sell up — and either curse yourself for the rash decision or praise yourself for your investing know-how.
As the price of bitcoin hit a new record high, this week has been one of those moments for me.
I bought £500 worth of bitcoin back in September 2021. I had always been against cryptocurrencies, but was strong-armed into it by my husband (then my fiancé) who had convinced me that we should dabble in this new, exciting way to make money. His argument at the time was simple but effective: 'But what if the value just keeps going up?'
I later sold at a slight loss, having decided to reinstate my membership of the Cryptocurrency Is For Fools Club. Since then, I have happily ignored all the fanfare that has surrounded bitcoin and other digital currencies such as President Trump's $TRUMP coin. But this week, which has been dubbed 'crypto week' by Republicans in the US, it has been impossible to block out the noise.
The price of bitcoin, the world's largest cryptocurrency, exceeded $122,000 (about £90,000) for the first time on Monday. The record high is predominantly down to a series of debates by US lawmakers about the regulation of digital assets such as bitcoin, which would lend them greater legitimacy and could boost their use. This comes amid Trump's desire to make America the 'crypto capital of the world'.
Spurred on by the possibility that cryptocurrencies may be endorsed by the US government, the price of bitcoin has jumped 13 per cent in the past month. This, plus a hefty rise in its price since Trump was elected, means that my bitcoin holding would be worth £1,425 today — a return of 185 per cent.
Since I bought bitcoin the S&P 500, the US's main stock market, has returned 40 per cent, and the FTSE 100, the UK equivalent, has returned 27 per cent. My stocks and shares portfolio is up about 26 per cent.
While these figures made me choke on my breakfast, and momentarily rethink my stance on cryptocurrencies, I'm still happy that I sold up.
There are four main reasons for this. First, I don't properly understand bitcoin or cryptocurrencies. I have my head around the basics (it's digital money that is not issued by a central bank, and there are a finite number of coins recorded on a central database, known as a blockchain) — but I don't have a grasp on how they, or the market, function — at least not to the same level as I do the stock market.
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As Warren Buffett once said: 'Risk comes from not knowing what you're doing.' He avoided chasing any digital currency or new technology that he didn't understand, and if that strategy is good enough for the Oracle of Omaha, it's good enough for me.
Then there's the fact that cryptocurrencies are highly volatile and speculative assets. Jason Hollands from the wealth manager Evelyn Partners said that unlike buying shares in a company, where you can seek to understand its strategy, assess its profits, dividends and outlook, it's anyone's guess as to what the fair value of bitcoin should be.
'It has no physical assets standing behind it, nor a yield attached,' he said. 'The price is ultimately down to what the next person is prepared to pay for it, and demand and supply can ebb and flow dramatically.'
Cryptocurrency supporters will often point out that the stock market is not too different. Sentiment about a company or sector can drive share prices, and even moderately bad omens for a firm's future earnings can see a sharp sell-off, particularly in growth stocks whose share prices are often based on future potential earnings, such as many US-based technology stocks.
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But as Laith Khalaf from the investment platform AJ Bell said: 'If the essay question is whether the global stock market will be higher in ten years' time than it is today, we can with a high degree of confidence say that it will be, based on historic performance.
'Over the next decade bitcoin may well continue to rise, but there is also a chance that it will lose all its value.'
Cryptocurrency is often used to finance some murky activities, and although mention of this has died down, it is still a factor in my choosing not to buy it. The Centre for Financial Crime and Security Studies, a research company, found evidence of criminal activity within the mining process for cryptocurrency (where computers are used to solve complex mathematical problems and are rewarded with new coins) and that some criminal networks were using mining facilities to launder funds.
It said there was also evidence of cryptoassets being used for the funding of nuclear, chemical, or biological weapons.
And then there is the question of what comes next. The momentous rise in bitcoin's price since it first looked like Trump could win the US election (it has roughly doubled in value since September) is proof that how investors feel about it can change at pace. If the US's pro-crypto policies are watered down, or Trump simply changes his mind, everything could change again.
If I had bought my bitcoin in November 2021, I could been sitting on a loss of about 70 per cent a year later. As the past teaches us, a crypto sell-off can be brutal.