As many of you who have read my columns are aware, in October of 2014, I wrote about losing half of my retirement investment in a security called the Bitcoin Investment Trust. At the time, it was the only investment vehicle available for investing qualified retirement funds into bitcoin. My initial $25,000 SEP contribution was worth less than half what I had initially invested.
That, however, has changed for the better. Significantly so. I’ll discuss that, but first, some background on the original investment and how bitcoin can be used in a retirement account at all.
I should remind you that my investment into bitcoin was done with a small percentage of my overall portfolio (less than 5%) and positioned for asset-allocation purposes in the alternative-investment (AI) class of my portfolio. Other investors may keep hedge funds, real estate or even gold in the AI portion of their portfolio.
For me, this was not just about bitcoin, but was even more so about asset allocation and my belief that bitcoins can be considered an alternative investment for those investors who believe in prudent asset allocation and can handle the risk associated with these types of investments.
In May 2015, I provided a one-year update of this retirement investment into bitcoin, and there hadn’t been much of a difference in value. I was still losing half of my initial investment.
Being the optimist that I am, I wrote of how I was still seeing good things happening for bitcoin and how great strides were being made in the use of blockchain technology. I closed the column expressing that my “hope springs eternal” that my investment would stop falling and potentially, provide a gain.
Obviously, most people can’t stomach the 50% loss I had taken, and any smart investor would probably have gotten out of that investment as part of a prudent investment strategy. But not me. I still believed in the value and potential for bitcoin; but then again, I used to believe in Second Life as well. (Don’t ask, it’s a long story.)
So I held my investment, and because of my asset allocation, I didn’t actually lose any sleep. Even with all of the love and support I got from readers (it’s amazing how many ways you can be called an idiot) and comments from even my old college buddy and investment pro, Barry Ritholtz of the Big Picture, I stayed in this investment.
So here it is, the end of 2016.
The last few weeks have been a roller coaster ride for equities. Since that last update in May, the Dow Jones Industrial Average has dropped about 3% (May 17, 2015, to Dec. 16, 2015). During that same period, a market favorite like Apple
has fallen 14.5%, while Facebook
has risen about 32% and Alphabet
has risen about 34%. In terms of alternative investments, the Gold SPDR ETF
has fallen 12.5% during that period and hedge funds haven’t fared well either.
Since my optimistic column in May about bitcoin, we’ve seen banks falling all over themselves embracing blockchain technology as the future, the launch of the largest bitcoin venture and even a debit card that allows you to spend bitcoin wherever Visa is accepted (there are some limitations, but the ability to use bitcoin as currency through this debit card is a big advancement).
Oh, and during that time, the Bitcoin Investment Trust, which trades on the OTCQX market as GBTC, is up 133%.
That’s right, the value of my retirement investment in bitcoins since I last wrote about it has doubled. As amazing as that performance is, I’m just now back at where I started with my investment. Such is the nature of a risky investment, which is what most alternative investments are.
So to celebrate this, I’m considering holding off on making an investment decision on the shares that I own and would like to ask you, my loyal reader, what should I do? You’ve shown me love in the past (love means different things to many people), and I’m sure I’ll get even more of it now. So I ask you, should I sell, hold or buy more? Please provide your comments below.
And go out and spend some bitcoin this holiday season — you can use that bitcoin Visa debit card.
Disclosure: Tatar owns shares of GBTC.