Many of you know that in the interest of asset allocation and journalistic integrity, I’ve taken a dive into bitcoin investments. For more on this please read my previous articles on Marketwatch.com.
I decided to place an investment with retirement funds into the Bitcoin Investment Trust (BIT). The disclaimer information for the BIT investment should be enough to frighten away the most prudent investor: “The BIT is a private, unregistered investment vehicle and NOT subject to the same regulatory requirements as exchange-traded funds or mutual funds, including the requirement to provide certain periodic and standardized pricing and valuation information to investors. There are substantial risks in investing in the BIT.”
The investment simply buys bitcoins and places them into this “trust.” It’s modeled on the SPDR Gold Fund, which takes a similar approach with their gold portfolio, which is available to any investor, in any type of account and is traded through the NYSE.
My initial investment was at a per unit net asset level of $64.51. During the last 3 months and since my initial investment, the value of individual bitcoins have dropped below the $400 level, I’ve seen the asset value for each of my units of the trust drop down into the $40 range. I’ve lost over a third of my investment. Ouch!
During that period we’ve seen the S&P grow from 1,940 to over 2,000, and DJIA rise above the 17,000 level. Please see more on this on my recent article on Marketwatch, here.
Along with this bad news has been the announcement by Apple of it’s new Pay solution, which many are calling “the bitcoin killer.”
I truly have to differ with this and actually believe that this can be good news for bitcoins.
On the surface, it seems to me that Apple’s Pay is an awesome attempt to recognize the functionality and capabilities of non traditional payment processes that bitcoin has provided. However, I’m not sure that it’s actually “changing” anything. It seems that it may just be putting some “lipstick on the pig” of the traditional payment process. Sure they have some major credit card players and retailers on board but will that really change the payment process, or just allow more hands “in the cookie jar” as transactional costs and identity theft concerns will still exist. In essence, it’s putting a shiny train on the same old tired tracks.
Also, do you really want Apple to have EVEN more of your personal information than they already have?
There are many in, and out of the bitcoin world who see the Apple Pay solution as good news for bitcoins. David Ripley is CEO and Co-Founder of Glidera, a Chicago-based bitcoin startup, and he feels that Apple Pay will accelerate the widespread adoption of NFC or Near Field Communication devices (these are the devices that read your Starbucks app off of your iPhone).
In an article online, Ripley believes that Apple will need to spend “significant resources getting people familiar with mobile payments and merchants logistically compatible.”
“Bitcoin is faster, cheaper, and safer than Apple Pay and it will always be. Especially for merchants. Once people are comfortable with the idea of using their phones to digitally complete a transaction, the benefits of digital currencies start to come into play.”
Ripley sees Apple Pay as a high profile on-ramp for bitcoin users.
“If a percentage of Apple users end up liking the benefits of Apple Pay, like its location-based features, they’ll see that bitcoin is already doing all of this. The service will help push bitcoin along.”
CNBC’s Brian Kelly feels that, “The announcement of a mobile-payment system by Apple was an evolutionary step. The infrastructure it runs on is old technology linked to a centralized financial system.” He believes that Apple Pay brings the need for a new payment process to the forefront and that could be good for bitcoins. “The decentralized Bitcoin network is more efficient, cheaper and secure than Apple Pay and eventually should be embraced by the consumer. However, just like digital music needed the evolutionary step from Napster to iTunes, so, too, do digital currencies need this move by Apple.”
Recently, eBay’s widely used PayPal solution has decided to accept bitcoins. Many see this as an attack against Apple Pay and an embrace of bitcoins.
Only time will tell what will happen to bitcoins. As I said in my book on them, “What’s the Deal with Bitcoins?“, I don’t consider them “safe for retirement, at least not yet.” Maybe it’s best for me to be the guinea pig at this point. Stay tuned.