A light-hearted look at investor attitudes to this new asset class
When launching a new fund, information travels in both directions. The creator of the product tries to impart the Fund’s unique advantages, while the potential investor articulates their key concerns. It’s a fun and informative process, as much for meeting new people as anything else.
Having recently launched a fund that invests solely in Bitcoin, and by inference being a fan of it, it’s been fascinating to hear investors’ concerns, while getting a closer look at the attitudes that prevail around crypto investing.
Slightly tongue-in-cheek, I would categorise our audience so far as follows:
Zealots
Zealots have already crossed the crypto Rubicon and are amazed it’s taking everyone else so long. They have a strong belief that governments are out of control, fiat money is being debased and that Bitcoin is the solution. Surprisingly, perhaps, Zealots aren’t just fed-up, disenfranchised, tech-savvy youngsters. Lots of greying retirees from the commuter belt. Won’t be swayed.
Blockers
Blockers are utterly determined that Bitcoin and anything to do with it is a scam. This is not open to debate. They expound all the standard counterarguments (use of power, manipulation, intrinsic worthlessness, drug currency etc) and have mentally shut the door. Interestingly, a category dominated by financial advisers. Lots of arguments about your best interests, risk and volatility in case they’re wrong. Also won’t be swayed.
Pragmatists
The Pragmatists are open-minded and curious. They’ve heard the arguments both ways. Despite acknowledging they don’t fully understand Bitcoin, they can see that something large is happening and therefore a small allocation makes sense, with a view to increasing or decreasing as the story unfolds. Keen to keep learning more and happy to outsource expertise.
Punters
“The chart looks amazing. I don’t care what it is, it’s going up”. Or words to that effect. Punters are annoyingly successful, in large part because they treat everything as a commodity and they know a good trade when they see one. No interest in owning Bitcoin as a replacement for fiat, or in the philosophical arguments around the future of money. If it starts showing signs of weakness, they’re out.
Ditherers
Arrive in a whirlwind of excited positivity, only to read an article by a Blocker which sows seeds of doubt. Focus has moved from ignoring the price and treating Bitcoin as a long-term portfolio member, to staring exhaustedly at every price tick, concluding either that it’s gone up too much, or it’s going down more.
Beard-strokers
The philosophical, academic type. Extremely well-versed in all aspects of finance and may even have written some sort of thesis on the subject. Can lecture plausibly for what seems like an age, in a way that refutes argument. Track record patchy since successfully calling a crash 25 years ago. Knew all about Bitcoin right from the start but still doesn’t own any.
Of course, these categories are interchangeable. One day the Ditherer will make a decision and in an instant be converted either to a Zealot or a Pragmatist. The Beard-Stroker, after years of missing out, could find himself drifting towards the Blockers. The Punter, having amassed sufficient wealth, might even find out what they’ve bought and convert to a Zealot (especially when they consider their tax liability).
We Fund Managers try to see things from all sides. Without a big chunk of Zealot, we wouldn’t be here in the first place. Without a bit of Blocker, we couldn’t constantly examine the counterarguments and question the thesis. We try and avoid being Ditherers or Beard-Strokers but are interested in their behaviour. There is a bit of Punter in us in so far as we have a method and if that method works for us, we stick to it. Also, we need to act quickly and dispassionately when the facts change. Above all, we aim to be Pragmatists, willing to retain an open mind and examine the evidence.
Bitcoin is an extraordinary innovation. It takes us all out of our comfort zones. Superficially it appears superfluous to requirements, wholly unnecessary. We already have technologies to transfer wealth, why do we need another? And yet here it is, growing by the day, attracting more and more usage. It is visibly being woven into the fabric of the US financial system. Would it have survived this long and reached this scale if there wasn’t a genuine, practical requirement for something new and improved. Possible, but unlikely, surely?
You don’t need to be a Zealot to be a Bitcoin investor. As crypto currencies expand their usage it will become increasingly apparent why enthusiasts enthuse, but, like all emerging technologies, its full utility will take time. It’s best not to be a Punter because you might be scared away by the unexpected price move. Probably the best thing is to be a Pragmatist.
Whatever you do, don’t be a Blocker.
