UBS Chairman Warns Against BitCoin: Insights

Bitcoin has surely been one of the greatest ‘newsmakers’ of 21st century. There is hardly anyone with access to any of the internet, tv, radio, or newspaper who has not heard about bitcoin. Bitcoins, which grabbed the attention of many, like Texas hold ’em, is still keeping its head steady, and continues to hit headlines even today. But, the latest news is not something sweet for bitcoin owners and enthusiasts. Not only that UBS chairman has warned against bitcoin frenzy, but also that its prices are stumbling. Speaking to CNBC at the 2018 Annual World Economic Forum meet, UBS Chairman Axel Weber, ridiculed bitcoin and other cryptocurrencies, stating that “this is a speculative investment”. Though he didn’t mention any, there are reasons for him calling bitcoin a ‘speculative investment’.

“Bitcoin IMG_5303” by BTC Keychain is licensed under CC BY 2.0

The first reason being the volatility of its prices. 2017 has witnessed the prices of bitcoin skyrocketing from around $1000 in early months and reaching almost $20,000 by the last quarter of the year. Staying true to its character and testifying its volatility, the prices have come down to half within the first month of 2018. The volatility factor becomes much more evident when another fact is considered.  The prices of bitcoin, which started its journey from less than one USD in 2009-10 period, has risen and fallen, way too abruptly, many times, till it has reached the present limit.

The second reason why bitcoin can be called a speculative investment is that the bitcoin is not backed by any security or assets. There is nothing in the world, to whose value, the price of bitcoin can be pegged to. This is reinstated by the words of CNBC’s “Mad Money” host, Jim Cramer, “[Cryptocurrencies] ultimately don’t sync with the value of the thing they actually represent, or tangential equities like an Overstock … or a Square or AMD or Nvidia”. Hence, their value depends merely on the prevailing sentiment in the market. Their prices go up with positive sentiments and comes crashing down with negative sentiments.

Another reason why bitcoin qualifies to be termed a speculative investment option is that, those who are investing in bitcoins, in general, are not looking for an annual income from bitcoins in the form of dividends or interest payments, neither does the bitcoin returns any annual income. What bitcoin investors are looking for is merely an expected future price gain. And this is exactly what speculative investors look for. Backing this view is the US Commodity Futures Trading Commission’s definition of a speculator (in commodity futures) as “A trader who does not hedge, but who trades with the objective of achieving profits through the successful anticipation of price movements.”

There is no doubt whatsoever that both Blacjack and investing require lots of wisdom. Careful investment of time and money in Poker as well as good asset backed shares and securities are always known to return great rewards. But, as against the normal asset backed investments, speculative investments, though extremely profitable at times, are highly risky and are not ideal for ill-informed retail investors. As governments are preparing to regulate crypto currencies, any future investments in bitcoins should be done after giving a careful second thought.

Tax Efficiency Currency Spread Betting

spread betting

When you start any sideline or freelance business, one of the most important issues to deal with is handling your income and paying your taxes. The differences are varied from country to country in how to pay your taxes and what income is even subject to being taxed. It pays to educate yourself about the best ways to shelter what income you can from the taxman, legally, of course. That knowledge and skill set may be the most valuable you acquire as you explore ways to trade online.

Spread betting is indeed free from capital gains tax in the United Kingdom. The trading practice is illegal in the United States because regulators consider the practice to be as close to gambling as possible. Spread betting got its start in the sports gambling world, but it quickly migrated over to the financial markets, where intrepid speculators can guess on the price change of a particular financial instrument.

Let’s say that you want to speculate that the price of a mining stock index is going to rise from $1000 to $1400 by the close of trading. You can find a spread betting exchange and bet $100 per point that it moves.

When you get involved in spread betting it is important to note that this is a leveraged method of working in the markets. That means that you can only put down a portion of your position into an account in order to take that position on a bet. That could mean that you only risk $50 and make $500 but it could also mean that you risk losing $500 when you bet $50. The losses can exceed the bet.

Not only is spread betting free for cap gains taxes in the UK, but you also do not have to pay stamp duty or commotions on your winnings. That makes the idea of spread betting tantalizing. You can bank more of your profits from the practice than you could be trading on other types of financial instruments. If you are in any way proficient at spread betting, you can benefit from the tax break and make a killing compared to other forms of financial investing.

It pays to understand how exactly spread betting works as well. The bid is what an investor or traders might offer to buy a security and the ask is what the market maker or broker is setting as the price. The difference between those two prices is the spread. Supply and demand. It harkens back to freshman year economics. When investors are super interested in a stock or product, the spread gets tighter and tighter. With computers algorithms getting better and better at matching buyers and sellers the spread is moving constantly. Being able to predict the movement can be a very lucrative skill to have.

While risk management in regular trading is such an important and complex topic, the same is true for spread betting. You want to be sure that you know how much money you have out there at any one time, so you can keep track of your orders and bets. Taking control of your risk profile is vital.

Day traders tend to be very good at predicting the movement of spreads because they spend all day staring at screens and trying to determine where the bid tick is going. Watching it day after day can give an intuitive feeling to traders and investors that are always paying attention to the markets. So getting into spread betting can be an effective way to diversify your income stream, with the added benefit of avoiding capital gains taxes. Spread betters in the United Kingdom can be sitting pretty if they are good at the game.