Mike Freer, of BWCI, replies:
I WROTE about the first and most famous cryptocurrency, Bitcoin, in 2018, indicating that it was unlikely to form part of a pension plan any time soon. It has taken me about three years to be proved wrong: almost all of us now have Bitcoin in our pension plans.
The reason is that pension plans generally include investment in global equities. Tesla is one of these global companies, and Tesla holds around $1.5bn of Bitcoin. Somewhat indirect, so perhaps I will not be judged too harshly.
Putting some approximate numbers to work, we can see the situation for an example holding of £1,000 in a global-equity index-tracking fund. Tesla represents about 1% of such a fund. Tesla’s market capitalisation is about $700bn, so its Bitcoin holding represents just 0.2% of this, which comes to two pence. Admittedly not huge. But Tesla is not the only public company holding Bitcoin, just the most well-known.
There are many other cryptocurrencies, but Bitcoin remains the leader, by some considerable margin. Cryptocurrencies were originally conceived as alternatives to fiat currencies, to allow frictionless transfers of payments without the need to rely on third parties, such as banks and governments. They were also designed to remove risks such as runaway inflation.
Typically they have volatile prices and are largely unregulated; their security is based on advanced computer cryptography, similar to methods that are used to encrypt the data of companies, financial institutions and your WhatsApp messages. Their value comes from their usefulness and a host of other factors summed up as supply and demand.
I am reasonably confident we will not see them as direct investments in mainstream pensions soon, just not quite as confident as I was in 2018.
