 Hi everyone, it's MJ the fellow actuary and in this video I want to talk about why I have been wrong regarding Bitcoin and Been wanting to make this video for a while, but this has been the first Sunday that I've had off in a long time I've been giving an eight-week course on financial engineering for the actuarial exam So that is subject cm2 if you're in England or IFM if you are riding in America and the thing is Why I think it's important to bring that up because here I am teaching finance You know did my fellowship in financial applications and we're looking at Bitcoin, which is a financial technology and I've been wrong about Bitcoin. I really don't know why the price is is as high as it is I've been in the crypto space Since I mean, I remember I can always put a date on it because I had a job interview in 2014 November 2014 and one of the questions were You know, what is your thoughts about Bitcoin and back then all I was like, you know, it's pirate gold on the internet And since then, you know, I've tried to learn a little bit more about this technology but it's still very much a a mystery to me because Bitcoin poses itself to be a currency an internet currency But it's not a very good currency if you look at its economic properties in order for saying to be a good currency You want it to be a good store of value. So yes, Bitcoin is a great medium of exchange Everybody wants, you know, we can all trade for for Bitcoin. That's great But it also needs to be a store of value and Bitcoin Because of its high volatility means it's not a very good store of value You know, you can hold Bitcoin and I've held Bitcoin and I feel incredibly Uncomfortable holding Bitcoin. I don't know if that's because I'm just very risk adverse But I don't like the idea that tomorrow it could be worth half or tomorrow it could be worth double You know, the whole thing about a currency is that it rewards people who do work who put an effort into society And they're receiving a token that they can use at a later time But with Bitcoin you have situations where people can buy early and then the price goes all the way up And then you have people who can claim a lot back from society through no Additional work of their own. So it kind of breaks the fundamental or social idea of what a currency is Designed to do. So if Bitcoin's purpose is to be an internet currency It's it's failing at doing that yet its price continues to climb And I think it's because a lot of people are seeing Bitcoin more as a as an investment Rather than as a as a currency, you know, people talking about ooh You need to hold some crypto in your portfolio and they kind of saying, oh, you know It's got a little bit of the diversification benefits from equities and bonds But if we had a look at Bitcoin as an investment, it also doesn't really have nice cash flows That other investments that you'd expect. I mean think about property You buy a property and you receive rent on a medium, you know, every now and then I think the end of the month or whenever you get You get your rent shares Twice a year or once a year you get your dividend payment bonds You get your coupon repayments, you know There's this there's this cash flow that is coming to you and that's the reason why you want to hold these assets Because holding these assets is going to provide you with a cash flow stream coming in and you can use that to meet your daily Expenses, okay, that's that's what a traditional investment looks like Bitcoin, there is no yield. There is no dividend. There's no rent There is no coupon all your banking on is that the price will go higher and higher and higher and higher and If you have to meet your daily expenses It means you have to sell a little bit sell a little bit sell a little bit until at the end of the day You have nothing left over, you know with at least with the property if your rental income is is more than your expenses Then use your wealth starts to accumulate but with Bitcoin Because you're gonna be selling selling selling you eventually gonna have zero unless the price keeps growing at this Accelerated rate that you keep selling small and small and smaller pieces in order to maintain your like I say your daily living expenses But this is where I think Bitcoin maybe falls short again of being an investment is in order for Let's just talk about investments with investments. We like Certainty, you know, we like the fact that I buy this property. This is gonna be the rent You know, yes, there might be vacancies yet there they might be you know little changes here and there We have to replace the aircon unit or there's a hail storm and we have to do repairs and that kind of stuff So there is uncertainty But we know that okay This is what the rental income is going to be, you know The largest portion of the investment there is some knowledge about it And yes, there's a little bit of risk that plagues it but the bulk of it is kind of known same with shares We know that a share is gonna pay a dividend year in year out There might be one or two, you know crazy years like I say with covert where the company might withhold that dividend You know just to meet their expenses while they go through a hard time But once things resume, they're gonna continue paying their dividend with Bitcoin We don't know what the future holds like how is this thing going to grow? Is it gonna be adopted on the international stage and then it's gonna, you know shoot through the roof? Our country is gonna collectively ban it and then it's gonna, you know, the price is gonna be forced down You know, we don't know and from an investment. There is so much uncertainty And we have absolutely no idea or like I say that there is no yield coming from it. So Bitcoin is a bad investment and it's a bad currency and That's why I kind of feel like if you're failing at these two fundamental things. Why does its price continue to go up? So I've been trying to think about why have I been wrong about the Bitcoin? You know, what is something that I'm that I'm missing So it's always nice to go read on the internet, especially Twitter to see what people are saying about Bitcoin You know, what is the narrative that is driving the price increase? And you know, yes, there's stories about oh, it's gonna become a global reserve currency That's never gonna happen This video might Might take very badly if that does but the likelihood of that occurring Oh Very very low yet There's still articles or written on it and people are believing this and they're like oof Governments all embrace Bitcoin instead of gold then, you know, the price of each bitcoins gonna be worth a million dollars per Per coin, you know, there's crazy sentiment like that. So there's one idea that This is gonna be a future reserve currency and hence the price is gonna go through the roof But other narrative is that, you know, governments are, you know, they're abusing their power They're controlling us and that, you know, that whole dystopian narrative and that Bitcoin is is the rebellious move It's the kind of way to say, you know, stuff you government stuff your capital Regulations we can take our money we can move it wherever we want and That is a very very powerful powerful narrative And I think especially in countries like, let's say China where there are strong capital regulations to have an asset Like Bitcoin that can just bypass these government laws in an instant. I think that's that, you know There's a lot of value around that But I think Governments are working to try and stop that to try and prevent that and we're seeing it already like with these Exchanges the, you know, know your customer and and all these kind of rules and regulations that are getting hit on the Exchanges so I don't think governments are gonna lie down and allow that to continue to happen But like I said, there's this there's this rebellious, you know, you buy crypto because the world is corrupt and What what fascinated me as well was this whole thing with dogecoin and and GameStop was how meme culture Has got so much momentum and how there's so many, you know Small individual investors that collectively can come together and be quite a force in these markets I mean traditional financial theory Says that no one individual can influence the market and then there were jokes about all, you know Warren Buffett could technically, you know, Buffett said he was buying a share of Buffett did this But Buffett never really abused that power. We now have Elon Musk who I Mean if you read his tour to feed very much knows what he's doing by saying game stonk and doge to the moon And you know, Tesla's gonna buy Bitcoin these statements are driving it He's very much a leader in the meme culture and I think that's what's causing a lot of the rally So it's almost like herd mentality that is pushing these these assets up and up and up and You know, there's that I think was was it Keynes. He said, you know, the market can remain Irrational longer than you can remain solvent and you want to keep those words too hard because you don't Just go and bet against the market and you know short Bitcoin because it fails at all these fundamental things Because, you know, the meme culture can can override that and your positions will soon close out and you'll be at quite a big loss So it's it's always good to say it. Well, maybe the market isn't irrational, you know Maybe I've just been wrong in my in my analysis. So this is what I've just been I've been thinking about lately I mean, I've been accumulating quite a bit of of Ethereum by by selling our pieces on on super rare and Initially, I was I was selling a lot of the ether converting it just into rands buying the MSCI You know exchange trade of fun. I mean being incredibly passive, you know You really have the bulk of my at my portfolio is now gone back into being passive like before COVID It was like a hundred percent passive COVID happened And I think, you know, because we were bored because of lockdown I went in made some active stock selections Which was quite a fun thing to do very rewarding the stock market bounce back And I'm slowly moving back into this this passive position having a few satellites out there in Selected stocks like for one kind of thing property has been It's getting a lot of bad rep at the moment But you know people saying I'm working from home is the future like mmm I think people want dedicated workspaces and so I do have like You know small little bits here and there on on various assets And so what I've decided to tell myself is All the ether that I'm getting now from selling my my NFTs on on super rare and and rare a bull I'm gonna continue to hold it Even though I don't want to so this is a very weird thing to say is that I'm holding a It's not a it's a significant amount. It's a significant amount in crypto and I do feel uncomfortable about holding it because I do feel Like I thought a crash was gonna come in January I really thought a crash was gonna come January I thought a crash was gonna come in February and yet the market keeps going up and up and up And yes, I know there's like these little dips where it goes, you know from 60 down to 49 Thousand USD, but it seems to bounce back and you know It has this this trend and it's almost like there's this this narrative that Bitcoin makes you rich is Back in business. I mean, I think that's the best way to explain the Bitcoin price history is to to look at the narrative 2014 it was this is internet pirate currency That no one really understands that you can use to buy drugs with the silk road So it's kind of like unless you really, you know, big into IT and Cryptography you kind of stayed away from it But the people who did hold it started building momentum People started writing articles on it because it was a very fascinating technology I mean the way the blockchain works is it's genius it really is captivating and so the narrative went from being this being internet pirate gold to Bitcoin, you know is making these nerds rich and as soon as it was that Bitcoin is making these nerds rich I think this is kind of also when I started getting in on it It was we saw this huge, you know climb from 20 2015 to like 2017 there was this huge climb and then of course the narrative came up bitcoins in a bubble bitcoins in a bubble and We had the crash at the end of 2017 Bitcoin fell all the way down and then the narrative was Bitcoin is dead. It's a failed experiment all that kind of stuff and then it was kind of like It stayed dead for a long time stay dead for well I mean a long time like a couple of months which in Bitcoin terms is is long and then the narrative was like Maybe bitcoins coming back Maybe bitcoins coming back and it started going up just slowly slowly slowly and then it was Bitcoin is back like after COVID it took a little bit of a hit and all that kind of stuff But like I say all the assets kind of did that but then it was like Bitcoin bitcoins back and then it pumped it absolutely pumped I missed it completely. I absolutely did not see that pump happening In fact, I had a lot of Bitcoin that I sold during COVID because I said, I Don't know it was it was it look in hindsight. It was a very stupid thing stupid thing to do but at the time it was I Don't know it felt like the right thing to do Remember I had friends and they're like they're still holding Bitcoin and I was like, oh, you know That's a that's a risky one to hold but that risk has paid off You know, I think at that moment Bitcoin could have gone down even further or Like what did happen is that it did shoot up and you know There's normally the more risk you take on the more return you're going to get and I think at that time I was like, we've just had COVID assets have been shocked. Everything's going a little bit crazy Let me rather move this money on to the stock market and divert my attention there because also the Bitcoin news and what's happening and different upgrades it does start to become a little bit overwhelming and I don't like to necessarily hold something that I don't really understand. So even though Blockchain was quite nice and easy. Well, not easy It took like a few months to to get your head around but once you got your head around you like, okay, cool I can trust this technology But because of all the updates and the latest news and the trends and this and that and this person's opinion and then This fork and then this other coin coming up and it just it does become quite quite overwhelming And I think that was also one of the reasons why why it got out But yeah, it's It's it's been fascinating to know why Why was I so so wrong? Was it just because like I said, there was it was a high risk I wasn't prepared to take on that risk and the risk turned out for the good and we've seen the things shoot up But then you have to ask yourself like why is it shooting up like like Like you can see this wasn't a video that I came with with a bit of a script And it's always not the best thing to do is to try and think On these videos and I see I've just got the the GoPro shooting me I can see it is is hitting 15 minutes so I should probably start wrapping wrapping this video up but like I say it just It's it's weird. It almost feels like the two things that make Bitcoin of use Contradict each other as soon as Bitcoin becomes stable like let's say Bitcoin was to come stable and for the next Five years. It was gonna just sit at 50,000 US dollars like let's say that just happened That was going to happen. Most people would sell they would say I don't want to hold an asset that just stays Stagnant, you know, I rather want to put it in equity property Or bonds and get my coupons my rent and my dividends, you know something to beat inflation So if soon as Bitcoin becomes stable People will sell it and it will and it will drop But the more crazy and high Bitcoin is the less practical it actually becomes as a as a form of Trade like as a trading mechanism. I mean, I don't actually know that many people who who use Bitcoin to meet their daily expenses I mean, there's some shops that, you know, try to act cool like oh, we accept Bitcoin But you follow them for three or four months after they announce this and they take it away And they say well, there's only two or three people doing it and the accounting nightmare that it involved Buying the coins and then selling it and taking the 1% you know fee from the exchanges And it just started becoming a big big mess so Bitcoin like I say for me, it doesn't make sense that this thing has has value understand the technology is very cool and Like I know people tease me about NFTs saying oh, it's just a JPEG And it's normally people from the crypto community and I'm like well Think about it Bitcoin is just a number in a in a database, but I don't say that as an argument against it I mean one could argue that a legal contract is just words on a piece of paper, you know There is this the social network effect that I think This is what gives Bitcoin a lot more power over all the other altcoins except for Ethereum. Ethereum seems to To also kind of have this Is this community effect the social networking effect like we all kind of have this collective understanding Everyone on the internet that Bitcoin can't be hacked Bitcoin is a little bit of a rebel thing to hold if you're feeling anti You know the authority of a government and it really I think Bitcoin has a very very powerful brand And I think that's where the value is now in the short term but I don't know medium to long term. I Really don't know Bitcoin Like I say, I don't hold any of it. I've got some Ethereum just because it's good for my portfolio to have a little bit of diversification So I do hope it goes up because Bitcoin Ethereum, you know rising tide pushes all the boats up, but it's It really is a weird one So if you've made it this far into the video, which is maybe just one or two of you Let me know your thoughts in the comment section below Let me know why you think Bitcoin has value And if you think it's gonna continue to go up in the future and the reasons behind that like are we just all aboard this hype Train and is this hype train just you know has so much momentum Or is there something that I'm missing and if I am I'm really really wanting to I really really want to know why What am I missing with regards to this Bitcoin thing? So, yeah, please let me know in the comment section below and thanks so much for watching Enjoy. Have a great Sunday evening or whenever you're watching this. Cheers