Jim Duffy comment: Tale of two generations and their Bitcoin strategy

The next 25 years will precipitate a whole new industry of digital finance, says Duffy. Picture: Ian Howarth.
The next 25 years will precipitate a whole new industry of digital finance, says Duffy. Picture: Ian Howarth.
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Imagine the headline… Bitcoin reaches $100,000! This is the ­scenario I posed to two Bitcoin-owners I know.

Of course, this is fantasy land for now, despite some well-known capital houses forecasting big gains over the next few years. But if any of these ­predictions ever play out – and never say never – then what do Bitcoin owners do with their coins and profits?

Both Bitcoin-owning gentlemen are very different. Number one is a millennial who believes in the decentralisation of the internet, the end of big banks controlling currency, and the power of the crowd. He works in London and owns half a Bitcoin. Number two is a 50-something who owns four Bitcoins. He has not reached his pensionable age and needs to work and invest well to see him over his golden years. When posed with what he would do when Bitcoin went stellar and reached the $100,000 mark, our millennial’s first response was to, of course, leave the value of this cryptocurrency in exactly that – digital and in his digital wallet. Why on earth would he convert it into pounds or dollars? The whole point of investing in crypto is to create a new world order where he can trade and pay for things directly with his crypto. This way he bypasses the banks and he has control of his assets.

So how does he pay his rent, buy a burger or rent a car on holiday, I wondered. Easy. Firstly, he gets his hands on the likes of a Coinbase credit card. Coinbase is one of the top cryptocurrency exchanges where one can buy, sell and store the likes of ­Bitcoin or Litecoin. The crypto credit card allows our millennial to maintain the integrity of his investment in crypto, while giving him the flexibility to spend globally.

Essentially, he explained, if he rents a car for example, either the car hire company accepts payments in Bitcoin, which he reckons is only a few years away, or he has his Bitcoin converted at the best rate at the point the car hire company accepts his Coinbase card. In the future, he believes that even when he buys a car, the likes of Porsche will accept Bitcoin as payment. Why would they not with so many Bitcoin millionaires in the pipeline?

On the other side of the spectrum, we have our 50-something, not quite retired, but bold enough to stick ten grand into a world he kind of understands, simply not to miss out on what could be. His “bet” with his four Bitcoin is risky, speculative and out of character. So, what would he do, if his holdings rocket to $400,000. I knew exactly what he would say, and yes, you’ve probably guessed, he would rip out $300,000 right away, selling three of his Bitcoin. The remaining solo coin, he would leave in the cryptosphere just in case it flew higher.

By converting his three Bitcoin from digital money to hard cash, via one of the digital exchanges, his retirement would be so much better. When sitting alongside his more “traditional” investments, his crypto-profits would afford him comfort and ­security. ­Perhaps even a better class of care home. When I pointed out that his prosecution of digital to fiat currency was not in the true spirit of crypto, the responses was as expected. For him it was a speculative investment, not a mindset or way of life.

Digital exchanges and crypto providers are already putting in place products that will cater for the huge number of digital investors who they believe one day will reap the ­benefits of their patience. For this generation, the provenance of their digital cash is paramount. It is a switch in thinking that the 50-something doesn’t really get.

For him, investing in crypto is like investing in fine wine or even gold bars. The next 25 years will precipitate a whole new industry of digital finance. Many are ready for how they know it will operate. Businesses are already trying to figure out how they will accept crypto as payment. Who knows? Maybe by then for our 50-something, the penny may have dropped and his care home will accept his monthly direct debit via his digital wallet.

Jim Duffy MBE, Create Special.