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What can we learn from Bitcoin?

What can we learn from Bitcoin?

Bitcoin is one of the more interesting innovations we have seen in financial markets in recent years. The digital currency shot to prominence in late 2013 when the price rocketed to above US$1000, and a whole new industry of ‘bitcoin mining’ emerged in response to the elevated prices.

Websites that allow “investors” to trade currencies and commodities have also moved to capitalise on the excitement by offering their customers the ability to trade Bitcoins at the click of a mouse. More recently, the way to profit from Bitcoins has been to go short, with the price falling back to around $200 more recently.




While Bitcoin is an interesting innovation, it is hard to see how a case can be made for investing in them. As far as I can tell there is absolutely no sensible way to estimate their intrinsic value, and if you buy a financial instrument with no idea as to its value it seems to me you can only be gambling.

The only clear winners in all this are the brokers who extract commissions from customers who are tempted to try their hand.

Tim Kelley is Montgomery’s Head of Research and the Portfolio Manager of The Montgomery Fund. To learn more about our funds please click here.


Tim joined Montgomery in July 2012 and is a senior member of the investment team. Prior to this, Tim was an Executive Director in the corporate advisory division of Gresham Partners, where he worked for 17 years. Tim focuses on quant investing and market-neutral strategies.

This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.

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  1. Bitcoin is volatile. It’s early days. No big retailers will allow anyone to pay with bitcoins yet. It is very concentrated, not that many people in the world own bitcoins so that’s one reason it is volatile. And some drug lords own some bitcoins because its good for laundering money. There is no way I would buy any bitcoins in the near future.

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