Some assets have fared better than others. But it’s an indication of just how much the coronavirus outbreak has impacted the global economy that practically no asset has escaped unscathed. We can most definitely include Bitcoin in this.
One month ago, the cryptocurrency was trading at a little above $10,000. Yesterday evening, the price was 50% lower. For context, the FTSE 100 is down almost 30% over the same period.
Yes, despite the horrible headlines and photos of City workers with their heads in their hands, the UK’s top tier of companies has actually outperformed Bitcoin. So much for the belief of some that the latter’s decentralised nature would make it the safe haven in times of strife.
But could NOW be the time to buy?
Not in my opinion. It’s no secret that the Fool UK team has collectively been sceptical as to the value of retail investors holding a wodge of the cryptocurrency. Sure, it’s made a few early adopters incredibly rich. But it’s also resulted in substantial losses for many who bought when the price peaked back in late 2017.
For me, this aversion holds today, even if the price of a single coin is half what it was only a few weeks ago.
My issues with Bitcoin remain, regardless of the price. It has no value beyond what someone pays for it, is extremely volatile even during times of market calm and, it would appear, is easily stolen. Nothing in the past few weeks has changed this.
For me, there are far better moves to be making in this coronavirus-linked crisis.
So what do you suggest?
My first suggestion doesn’t involve any buying or selling at all. Instead, I’d recommend reaching for the history books. Doing so would reveal that bear markets are actually far from rare. The Great Depression was kick-started by the Wall Street Crash of 1929. Since then, there have been 25 bear markets in the US. On average, these have endured for 10 months.
Does this make negotiating the current environment any easier? Probably not. That’s especially as it seems share prices are likely to continue heading southwards over the next few weeks/months. On a more positive note, we do know that things turn around eventually. Should this prove the exception to the rule, we’ll have far more important things to worry about than share prices!
Another smart move would be to take a closer look at assets that have shown to give some protection to portfolios in the past. Gold is a good example, despite falling recently due to investors selling what they can in a ‘dash for cash’.
Of course, buying anything at the moment takes considerable courage. But if you feel that the shiny stuff will eventually follow its traditional trajectory of rising when equities are out of favour (as it did during the 2007-09 financial crisis), an exchange-traded fund tracking its price could be the most appropriate, cost-effective way of getting some exposure.
A final suggestion would be to keep things simple and stick with equities. Simply use pound-cost averaging to continue buying shares for the long term.
And if picking individual company stocks seems too risky, consider buying a selection of cheap trackers and/or active funds with excellent track records, such as those managed by Terry Smith and Nick Train.
Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.