With Bitcoin falling from a peak of around USD67,000 in September 2021, to its current price of USD19,038, there are quite a few people who will have suffered heavy losses. With this significant change in value, I thought I would provide an update on my own crypto position.

Since my last post, I have sold out of alt coins and have consolidated into bitcoin. I did this progressively and sold out of my ETH holdings in totality. I have also reduced my overall exposure to crypto in favour of other investments (at peak investment, crypto represented 2.66% of my overall portfolio as at 27^th November 2021). Whilst I still have some funds invested in crypto, a full loss would not impact any of my plans around retirement, savings, or daily living (currently crypto represents around 0.47% of my overall portfolio as at 11^th June 2022).

The reason for this reduction in crypto exposure is due in part to an increasing interest in the underlying dynamics of the recent push of crypto prices. The recent flood of money, and prevalence of marketing across social media created more hype and as a result increased my view of unsustainable price levels.

But the main driver for my opinion was not just the price levels, but the people and investors who were likely to be purchasing crypto currencies. In my opinion, a large proportion of people would have been investing funds which they are likely to need should a change in their personal financial situation occur. As such, they will be more likely to liquidate these investments first for a financial event, or if there is an increased risk of not having funds available for a future event.

Essentially, I became more concerned about the ability of investors to hold their investments through a period of challenging economic circumstances. This inability to hold investments, increases the risk of a flight on crypto more than other assets (a similar effect to a highly leveraged asset class), especially since many investors in crypto may not have exposures or previous experience in investing in other asset classes and therefore may not be used to volatility. This concern had led me to reduce my holdings and reinvest in other assets.

In my opinion, I feel that the current crypto market has some parallels to the stock market of the early 1900’s where hype, rumour, insiders, bucket shops, and everyman investors were prevalent.

I am unsure where the bottom will be for crypto, there may be some more downside to go, and as such am unlikely to increase to my holdings any time soon unless I see some form of sustained recovery.

With this being said, I do still believe that crypto has a role to play in the future. Whether this is part of a wider investment portfolio to generate capital returns, or simply as a transactional medium in nature it remains to be seen. The adoption, and ease of transaction should ensure the survivability of the technology. I am just unsure whether many of the coins will be as resilient.