Donald Trump’s election in November has been followed by a surge in valuation for cryptocurrencies including Bitcoin and Dogecoin, backed by his close associate Elon Musk. With an unabashedly pro-crypto administration in office in the world’s largest economy, is it time for ordinary savers and investors to reassess attitudes and consider cryptocurrencies as a valid part of their savings and investment portfolios?
Founder of Prosperous Financial Eoin McGee agrees that cryptocurrency is a highly contentious area. He believes that with cryptocurrency still in its relative infancy no one knows how it will pan out in the long term.
“We have a hundred years of data on stocks and bonds and shares, and we can compare it. That gives you real, intelligent insight into what has happened in the past and we just don’t have that with crypto. It could be the next big thing, but we just don’t know.”
McGee says that for crypto to succeed long term we have to get to a point where most people buy into it; he believes that Donald Trump’s presidency might be the thing that gets it over the line.
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“He could legitimise it but we can see that even a couple of tweets from him or Elon Musk can drive the prices up or down. Bitcoin isn’t underpinned by anything; it’s not tagged to anything, and the lack of regulation is a big issue.”
Ciarán Doyle is an accountant and tax adviser, and the founder of CryptoCount, Ireland’s first dedicated Bitcoin tax compliance service. He says there is an enormous misconception about cryptocurrencies, driven in the main by a lack of understanding coupled with resistance to any new technology, especially when it threatens to reconfigure the world’s financial system.
Bitcoin and cryptocurrency should not be considered synonymous, says Doyle. “They are not the same. Bitcoin has a supply cap of 21 million, is decentralised, and is therefore not controlled by any single entity. The same cannot be said for any other cryptocurrency and, as a result, Bitcoin is the most popular and most trusted digital asset in the world.”
According to Doyle, there is a sizeable and growing cohort of people in Ireland who have taken the time to study Bitcoin in depth. “They have been buying and holding Bitcoin for many years,” he says. “They will continue to hold their Bitcoin regardless of the price as they believe that Bitcoin is still in its infancy and now find that the people who laughed at them in times past for investing in a ‘Ponzi scheme’ are now asking for help in making their first purchase of Bitcoin.”
High profile failures such as the collapse of FTX have not helped Bitcoin or the wider perception of crypto, however. “We are no stranger to the collapse of financial institutions in Ireland and unfortunately a booming market will attract unscrupulous and dishonest characters,” Doyle says. “It has been happening forever and unfortunately it will continue.”
It is hoped, Doyle says, that regulations that date back to a pre-digital age will be updated to reflect the world of digital assets and that strong regulations will be introduced, together with a more favourable rate of taxation to encourage more people to invest in Bitcoin.
The new US administration has not only acknowledged the importance of Bitcoin to the US economy, it has also outlined a number of key steps that it intends to take to become the leading nation in Bitcoin.
“Firstly, it intends to put workable regulations in place that will protect investors and encourage innovation,” Doyle explains. “The previous administration had been openly hostile to the industry and had gone so far as to deny access to the banking system for any firm that was operating in the Bitcoin or crypto space.”
Another hugely significant move by the US government will be the creation of a Strategic Bitcoin Reserve, under which the US intends to acquire one million Bitcoin over four years. “This will give the USA the digital equivalent of Fort Knox and there is widespread speculation that many other countries will follow suit,” Doyle says.
This could point to a new dawn for Bitcoin and cryptocurrency, in his view. “The largest fund managers in the world are recommending clients to allocate a 2 per cent portion of their portfolio to Bitcoin, and as a result I would expect many other investment managers to follow suit,” says Doyle. “This is a sensible approach and gives investors exposure to the best performing asset of the last 10 years. They had previously recommended a 1 per cent allocation, so it’s interesting to see their growing confidence that Bitcoin is here to stay.”
McGee remains sceptical, however: “The saying goes that an individual has to invest in 22 ‘next big things’ for just one of them to be right. I am very, very happy to get rich slowly. It’s boring and it’s simple but people sleep at night as a result.”
