You're probably too emotional to own Bitcoin
With Bitcoin hitting repeated record highs this year amid optimism over 'pro-crypto' Donald Trump, many want in. Crypto bulls dismiss Bitcoin's early 2025 plunge as a temporary blip, with the subsequent rebound to new highs portending even bigger gains ahead.
But if you feel tempted to buy crypto, ask yourself a simple question: 'Why should I own it?'
Many say crypto's recent surges are justified. Crypto firms were big Trump and Republican donors, so now they expect lighter US regulation and pro-crypto legislation. Trump has already established America's 'strategic bitcoin reserve' and 'digital asset stockpile', and American regulators have dropped investigations into Coinbase, the largest US crypto exchange.
Trump's two eldest sons made a big investment in a Bitcoin mining firm, while Trump's ' memecoin ' investor dinner in May spurred heartfelt headline hopes.
It isn't just America. As you know, Britain's Labour government aims to bolster London's status. Chancellor Rachel Reeves announced the 'Plan for Change' in April, aiming to align crypto regulation with that of traditional finance – using clear guidelines and antifraud measures to bolster crypto confidence and innovation.
Beyond Britain, virtually every global financial hub vies to be crypto's capital. Hong Kong has over 1,100 crypto-tilted fintech firms, up fivefold from 2017. Switzerland's 2021 crypto framework fostered a booming startup landscape. Japanese regulators mull crypto regulatory reform similar to Britain's, potentially cutting crypto tax rates and paving the way for Japanese bitcoin ETF approval.
Some publicly traded firms are increasingly adding Bitcoin to their holdings, potentially facilitating crypto bleeding into stocks. While that merits watching, these so-called 'crypto treasury firms' total an estimated 135 in all and, outside a handful, are so small they aren't even in major indices. A single firm, Strategy, accounts for over half of corporate Bitcoin purchases.
Again, what is the case for you to own crypto? Some say it diversifies, guarding against risks to normal currencies or assets, or hedges inflation. Since Bitcoin supply is capped at a now-approaching 21 million, bulls believe it can't be endlessly devalued like pounds or dollars. Plus, many Bitcoins are lost, likely forever, reducing total supply.
On the other hand, overall crypto supply is infinite. Think Ethereum, Dogecoin, XRP, Trump's memecoin and more ahead. All defray demand and raise questions about which survive long term. Trump's memecoin has nosedived since its launch, illustrating crypto's fickleness.
Still, most bulls tout giant gains. Since 2010, Bitcoin soared 162pc annualised through 2024's close. It rose 125pc in 2024. It climbed 47pc from America's election through June 30, despite 2025's wild volatility. Explosive!
But huge surges pair with deep crashes, as 2025 has already shown. In rolling 12-month spans this decade, Bitcoin returns ranged repeatedly from 2,156pc to -79pc. It unpredictably booms and bombs.
Bitcoin topped £100 in April 2013. Days later, a -70pc swoon started. Later in 2013, it neared £700. Within roughly 21 months, it dropped -83pc. It did the same in 2018. The extant boom follows 2021-2023's -73pc bomb. Multiple 1970s-sized stock market crashes in just one decade. Even early-2025's relatively 'small' drop was -30pc! Poor timing and selling out can sink you.
What drives these swings? Not fundamentals – crypto has none. No industrial uses, profits, sales or yield. The industry is rife with crime and scams, as you have seen with multiple UK convictions in 2025 alone involving millions of pounds stolen via crypto scams and ATM fraud.
July's global OmegaPro scam is the latest, to say nothing of February's Bybit hack, crypto's largest ever, or America's infamous FTX fraud.
Also, most 'coins' are vastly too volatile to be actual currencies. Yes, there are stablecoins – those pegged to a major currency – which overall swing less.
But 'stable' isn't always so stable, and regulatory haze abounds. For example, recently proposed UK guidelines suggest regulating non-UK-issued stablecoins differently from those minted in Britain, likely causing endless confusion if implemented.
Inflation hedge? No. 2022's -64pc Bitcoin drop came as UK inflation galloped to 11.1pc year-on-year, and America's hit 9.1pc. Bitcoin failed its only inflation hedging test.
So, what explains crypto's swings? Demand shifts, full stop. Pure sentiment.
Can you time crypto investors' mood swings? I can't. If not, can you really hang on long term if Bitcoin nosedives again? Emotions don't help. With volatile assets, investors often buy after big gains – like 2025's – on fear of missing out. When prices fall, they sell out of fear of holding on, locking in losses.
I have watched investors repeat this human folly in volatile commodities and stocks for 50 years. Crypto is stock market volatility on serious steroids. Can you stomach that?
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