Investcorp Senior Advisor On Bitcoin: Take The Money And Run

It’s time to take the money and run. Money as in cryptocurrency, that is.

“A lot of regulators are bothered by Bitcoin. They are now getting together and will get pan-national commitments on how to regulate bitcoin. Take your profits, right now,” says Savio Tung, a recently retired CIO for $21.4 billion private equity firm Investcorp and now a senior advisor to executive chairman Mohammed Alardhi.

Anyone who started the year off buying Bitcoin has learned just how important Asian regulators are to its price movement. China banned Bitcoin exchanges last year. South Korea is aiming to do the same this year. So far, Bitcoin has not bounced back as strongly as it had following China’s ruling. The cryptocurrency is down 24% this year.

But for investors who have held it longer than January, Bitcoin has been a winning lottery ticket. It’s up 91% in three months. And over 330% in the last six months. Over the last 12 months, a $1,000 investment in Bitcoin has turned into around $11,460.

Bitcoin fell below $10,000 last week but has since returned to plus-10k territory. Cryptocurrency is a very risky bet and investors should liken it to casino chips rather than a real security at this point. Many investment banks and hedge funds are playing with client money, or the house money, testing the waters with bitcoin and other cryptos. It’s been nothing but lucky sevens, blackjack and a royal flush since, for most.

Even considering Bitcoin’s high of around $20,000, bitcoin has still been a money maker in a very short period of time. The ongoing decline is not all South Korea’s fault.

Visa recently forced the shut down of some of the cryptocurrency cards in Europe. BitConnect announced its plan to close its lending and exchange platform, adding more negative headlines to an industry that can’t even sign up new customers let alone sell them out of the market when it’s crashing. The entire industry is in its infancy, and to some, it’s akin to a freak show: flamethrower coins, bearded lady coins…

Headlines from South Korea are not helpful. Most investors doubt South Korea will be able to ban all of its exchanges, and if they did, the locals would do what the Chinese did: move money into exchanges in other countries. Japan is a possible respite.

Investors may also be switching to cheaper coins.

Despite Bitcoin’s meteoric rise in price, it has never been the best-performing cryptocurrency on an annualized basis, according to an analysis by U.K.-based Merchant Machine.

Ripple was the best-performing currency in both 2014 and 2017. In 2015, Litecoin had the best 1-year return, although Stellar Lumens had the best return from 2015-2018. Ethereum was the best-performing currency of 2016. Only Bitcoin, Ripple and Litecoin have appeared in the top 10 performers for all years.

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