Ask most financial podcasters how they got into investing and they will probably cite an interest in business or an enthusiastic parent who encouraged them to look at the stock market.
For Peter McCormack, early inspiration came in the form of “a bag of weed”.
“The reason I got into bitcoin was back in 2013, one of my friends came round and said he’d found this new website called Silk Road,” he reveals in an interview with the FT’s Money Clinic podcast.
“To buy your weed, you had to have this thing called bitcoin. So I bought some.”
Fast forward to today, and the podcast McCormack founded in 2017 — What Bitcoin Did — is one of the best-known financial shows on both sides of the Atlantic.
Over the past five years, the 42-year-old former advertising executive from Bedfordshire has travelled around the world interviewing bitcoin commentators ranging from investors and tech specialists to macroeconomists and executives working in the fast-growing crypto industry.
McCormack says: “Six or seven years ago, my life collapsed. I got divorced, my company went bust, my mum died and I was two weeks away from losing my house.
“I started this podcast in 2017, not thinking it would be anything, just more of a hobby. Now I’m interviewing a president. There’s no way of even trying to understand how this all happened.”
A bitcoin bull, McCormack is not afraid of allowing his views to be challenged on his podcast, but shuns conventional investments in pensions and stocks and shares Isas as he believes that the cryptocurrency will produce far superior returns. He has also invested in bitcoin miners — which create new bitcoin by solving complex computations — and even mined some bitcoin himself.
However, in his Money Clinic interview he reveals he has a “buy and hold” strategy and no longer attempts to make money by trading bitcoin after disastrous early losses.
“In 2017, I think I invested around $30,000. By the end of that year, [I was] close to $1.5m and I then proceeded to lose most of it again just by not really understanding the market at all and just thinking I was a genius,” he admits.
“I decided then to stop trading and took a very different strategy. I believe in bitcoin being the best form of money that exists, so I decided I’d put as much of my personal and business profits into bitcoin [as possible] and just hold it over the years.”
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That has proved more lucrative for McCormack, on paper at least.
“It’s changed my financial position,” he says, declining to go into further detail. “I wouldn’t say I’m gloriously wealthy, but it’s one of these weird things. You never feel rich because you never really want to spend your bitcoin.”
On the FT podcast, he explains why he has faith that, in the long term, the potential returns from bitcoin will surpass any other form of investment.
“For me, it’s a store of value. But when I was recently in El Salvador, I was using bitcoin I have on my phone . . . to buy coffee, to buy breakfast, to buy dinner. So I was using it as a medium of exchange.”
Fellow podcast guest Katie Martin, the FT’s markets editor, questions this duality.
“The real puzzle at the centre [of bitcoin] is either it really is going to the moon or it’s a currency that you can use to buy eggs, Tesla cars and all the rest of it. It can’t be both. The crypto industry has not yet come up with a good way to square that circle.”
Nevertheless, she accepts that it has been a breakthrough year for bitcoin. A growing number of mainstream financial institutions are showing serious interest in crypto; the US listing of crypto platform Coinbase was another big moment; and El Salvador is unlikely to be the last country to make bitcoin legal tender.
However, the surging popularity and prices of crypto investments have put them on a collision course with financial regulators, notably in China where the ongoing crypto crackdown has caused big swings in the price of bitcoin and other coins this year.
China is one of many nations with plans for central bank digital currencies (CBDCs) which, in McCormack’s view, are “the ultimate form of control . . . depending on where you live, your transactions can be used against you”.
The mainstream investment world is divided. Cathie Wood, founder of Ark Invest, predicted last month that the price of bitcoin could surge to $500,000 within five years (in an FT poll, three-quarters of readers disagreed). Ray Dalio, founder of hedge fund Bridgewater Associates, recently warned regulators would “kill” bitcoin if it became too successful.
Yet despite the risks and pricing volatility, the possibility of making a lot of money very quickly has undeniable appeal to younger investors.
The Financial Conduct Authority estimates that more than 2m people in the UK hold bitcoin or other forms of cryptocurrency as an investment, yet many are unaware of the risk of investing in an unregulated asset class.
On the FT podcast, McCormack warned younger investors to be especially wary of crypto-related fraud.
“Consider that everyone’s a scammer and protect yourself,” is his rule of thumb. He uses hardware wallets and private keys, but scams are sophisticated and he urges hyper-vigilance.
“You might get a fake email [supposedly] from Ledger saying that you need to update your hardware wallet, plug it in — and then you have your bitcoin stolen from you,” he says. “The threat model is wide.”
Asked what advice he would pass to younger investors, McCormack urged them to develop more of an interest in bitcoin than simply the price before they parted with any cash.
“First and foremost, before you invest in this kind of thing, make sure you’ve got a job and a good secure income and then make a decision about what percentage of that you want to invest.
“Understand what bitcoin is, and the role that the people who support bitcoin think it can play in society.”
“And don’t trade. Ninety-five per cent of people who try to do that will lose. If you must trade, please don’t use leverage. Bitcoin is volatile. [Leveraged trades] will play with your emotions. I’ve spoken to many people who’ve completely screwed up financially with crypto and lost everything.”
To listen to the interview with Peter McCormack, click on the link above or search for “Money Clinic” wherever you get your podcasts