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I do not pretend to be an expert in Distributed Ledger and Blockchain technology, however, I do see the huge potential in it. Although, in my opinion, currently only a select few can truly understand how the technology works and its applications, the same can be said about the internet, mobile phones and computers, back in the day. We live in an age where data is king and any move to protect that a good one, surely?

As mentioned, I do not hail from Silicon Valley and my first language is not Javascript. My job is to look and analyse investment trends and find ways to grow and protect my clients’ wealth. It is very apparent that over the last few years, cryptocurrencies like Bitcoin and Ether have been an increasingly popular ‘alternative’ to fiat currencies. It is very difficult to get the exact figures but I think it is safe to say that there have been more first-time investors, men and women who have never invested before, in cryptocurrencies than any other asset class. But do they really know what they are investing in?

The technology, and as a result, the currencies, were originally intended to form an easy way to make payments without the middleman taking a cut of your hard earned money. How long has it taken for that to fall by the wayside? Cryptocurrency exchanges are charging around 4% to buy and sell cryptocurrencies which is completely contradictory to why it was initially developed. And so begins other people making money off the back of new technology.

You may not be so lucky next time

I have seen my fair share of tech bubble bursts so am fully prepared for what is to come. I have experienced it first hand and I have to say, it is not pretty. I was one of the thousands and thousands of people who invested heavily in these new tech companies back in the late 90s and early 00s. I was also fortunate enough to have got out just at the right time because I was buying my first property. I know the signs and what I predict is a “Cryptocrash”.

The huge valuation of the currencies are not sustainable and with previous tech crashes, we have seen drops of around 90%. We have no reason to disbelieve that this won’t happen again. Mark my words – Cryptocurrency will be the next 2001 telco crash or the 2000-2002 dot-com crash. We are seeing the same symptoms – volatile spikes and crashes, huge amounts of money being invested, huge valuations. The fact that most savvy spokespeople and investors have all said that they do not know which way this is going to go should ring a few alarm bells.

Those in their 20s have never experienced a crash in the market before so they believe the hype and drive it up even more. You learn through experience in this game and the longer you go from a crisis the higher the number of market participants have never experienced a crash – this fuels the bubble further and means when the crash comes it will be much larger.

It doesn’t end with cryptocurrencies

It is not just cryptocurrencies, companies like Monzo and Revolut are developing pioneering technology but how long will they last? How long before the technology they develop is benefitted from by others? Ask Jeeves, Alta Vista, Lycos, AOL – same thing happened – the charts look almost identical to that of Bitcoin, Ether, Litecoin. The technology behind them was pioneering, however, other people benefitted from the development and where are they now?

We are living in very interesting times and are currently entering a behavioural finance phase driven by a herd mentality. This has the potential to be catastrophic but there will be lots of opportunities available. The real value and longevity is in the technology, not Cryptocurrencies. I predict the crash happening within the next 18-24 months. In the meantime, ride the wave but be prepared to cash out.

By Haig Bathgate, Co-CEO of Tcam Asset Management

 

 

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