Bitcoin, GameStop and Other Speculation

While Bitcoin has been making the news for a few years now. GameStop is a relatively new topic of interest. While they are completely unrelated to each other, we have fielded more than a few enquiries about them both in recent times.

I’ll start with Bitcoin. Crypto-currencies have been surging of late, with their seemingly endless upward march creating plenty of interest. At the time of writing this article, Bitcoin had passed through $60,000 USD earlier this week before settling at the end of the week at $47,000 USD. A 20% movement in a week is not unusual for crypto-currency. Much of the current enthusiasm for it stems from Elon Musk’s significant investment ($1.5 billion USD). There seems to be a “Cult of Elon” vibe, with many first-time investors using his significant profile and support for crypto as a sign that it’s a safe place to be! It’s perhaps the topic for another article in future, what Bitcoin is and how it works, but there is no shortage of information available about it.

GameStop is a video game retailer in the US (similar to EB Games). It’s shares are listed on the Stock Exchange in the US. After typically hovering around the $10 – $20 USD mark for many years, in January they shot up to $347 USD. Fortunes have been made and lost as small-time investors, subscribed to a subreddit forum have used their collective weight to massively inflate the share price. Largely this has been a protest against Wall Street hedge funds who have shorted the GameStop shares. Massive sustained and co-ordinated buying by retail investors has resulted in significant losses for some hedge funds. The mechanics of short selling and the ‘short squeeze’ (and therefore how this has all worked) are also topics for a future article. The significant temporary rise in the share price (completely unrelated to the fundamental business of GameStop) have made this stock front-page financial news.

As mentioned previously, Bitcoin and GameStop are unrelated, perhaps with the exception of one thing – speculation. While it is predominantly our existing clients and experienced investors that have enquired about Bitcoin and GameStop, it is my view that neither of these are viable investment strategies.

While Bitcoin may become a more stable investment option down the track, right now with wild daily swings, it remains unregulated and speculative at best. The GameStop episode is more about a short term strategy than a long term investment in a specific company. Both of these have the ability to result in significant losses for those who are ‘following the herd’. You are unlikely to see this type of speculation recommended by those of us who focus on investing our clients’ funds with long term capital growth and/or a reliable income stream in mind.

Investing can be complex, but it’s important not to go all-in on the ‘flavour of the month’. Diversification and security is key. Contact us today to let us guide you through.

This website contains general advice which does not consider your particular circumstances. You should seek advice from Wakefield Partners who can consider if the general advice is right for you.