Bitcoin is a 'one trick pony' whose best days are gone - but its collapse could stoke carnage, warns top investor

Bitcoin is a ‘one trick pony’ but could stoke market carnage if it suffers a spectacular collapse, a top City investor has warned.

Simeon Willis, chief investment officer at consultancy XPS, said that while the cryptocurrency has delivered huge returns for some, those days ‘are long gone’ and it has underperformed other assets in recent years.

And Willis said it could ‘wither fast’ if it fails to take root as a fully functioning currency – and that it is a ‘one trick pony’ because the blockchain technology underlying it cannot be adapted to other fast-growing digital finance areas.

But, writing for the Daily Mail and thisismoney.co.uk, Willis warned that a sudden demise in the cryptocurrency could create chaos for conventional assets and the wider economy.

‘The evaporation of a £1trillion market is highly likely to lead to people selling risky assets like equities and buying safer assets like bonds,’ Willis said.

‘The direct and indirect loss of wealth would mean less money in people’s pockets to spend in the economy - so we would expect to see this impact UK economic growth.

Bitcoin has underperformed other assets in recent years, Simeon Willis said

‘So while I may not have bought into the investment case for Bitcoin, I’m hoping that it can hang on, but if it can’t, that any demise is long, drawn-out and predictable. For everyone’s sake.’

The comments come as Bitcoin investors continue to enjoy a rollercoaster ride.

Last October, it spiked to an all-time high of $126,000 before sinking below $60,000 by July this year.

A multi-billion dollar intervention into febrile bond markets by US Treasury secretary Scott Bessent over the summer, as well as hopes of favourable US legislation, helped spark a rally to more than $80,000 but more recent days have seen it turn lower amid further volatility for bonds.

It’s not scaremongering to consider that Bitcoin could disappear within a single day

By SImeon Willis, chief investment officer, XPS Group 

We probably all know someone who knows someone who has made a fortune on Bitcoin. According to government figures, 240 Britons earned more than £1million from crypto currency in the 2024-25 tax year, each earning an average of around £3million. It’s easy to see why.

Simeon Willis of XPS Group

If you invested £2,500 in Bitcoin ten years ago you’d now have around £300,000, more than enough to buy the average UK house, mortgage-free. But this statistic obscures a hidden truth - that in the last five years there have been far fewer rags-to-riches Bitcoin millionaires created. Those days are long gone.

Between 2016 and 2021 Bitcoin returned a staggering 7,000 per cent. However, in the last five years it has returned only 72 per cent, not even doubling your money despite the spike in Bitcoin over the last month which accounts for more than a third of this five year growth. Bitcoin has underperformed a typical stocks and shares investment such as the FTSE All World global equity index which has delivered 75 per cent over the same five year period.

Yet, the exceptional pre-2021 Bitcoin growth still lingers as a hope for many. But from here, there’s two long term outcomes for Bitcoin as I see it. First, it takes root as a fully-functional currency with enough new everyday users buying goods and services in Bitcoin to replace all the current speculators and, in doing so, sustaining, and potentially boosting, the price.

Or it doesn’t gain adoption. And if it doesn’t, it will likely wither fast.

Some argue that crypto serves an essential role in broader digital finance. But blockchain technology, the beating heart of digital finance, doesn’t actually need to use cryptocurrency.

For example, DIGIT, the planned issuance of a digital UK government bond in 2027, will use HSBC Orion, a Sterling-based blockchain - meaning no crypto needed.

What’s worse is that Bitcoin is a one trick pony - the Bitcoin blockchain only does Bitcoin. It doesn’t do smart contracts which can automate payments, and is not programmable for growing digital finance areas like tokens. Other blockchains could eclipse Bitcoin with superior capabilities, and we know that in modern day finance, customers have a tendency to move quickly. Take the spectacular failure of Silicon Valley Bank within 48 hours of the start of the bank run. It’s not scaremongering to consider that Bitcoin could disappear within a single day. Stranger things have happened.

So what if Bitcoin fails spectacularly? First, you’d see a sharp withdrawal from digital markets, including redemptions of other crypto and stablecoins. In this situation, despite what the name suggests, you may not get all your stablecoin money back. The most popular stablecoin is USD Tether, with coins totalling around $140billion. Unfortunately, whilst three quarters of the assets backing Tether are low risk, the remaining quarter include more volatile things like volatile precious metals and, wait for it… Bitcoin.

Then we’ve got the equity market. The evaporation of a £1trillion market is highly likely to lead to people selling risky assets like equities and buying safer assets like bonds. In 1998, the failure of hedge fund LTCM - along with the Russian debt default - saw a double digit sell-off in equity markets. The direct and indirect loss of wealth would mean less money in people’s pockets to spend in the economy - so we would expect to see this impact UK economic growth.

Last would be the detrimental impact on the future development of the broader digital asset market, which otherwise holds promise of vastly reduced transactions costs, faster settlement in investment markets, and a new era of investment opportunity for individuals to invest more-like big institutions, for instance in high returning private markets.

So while I may not have bought into the investment case for Bitcoin, I’m hoping that it can hang on, but if it can’t, that any demise is long, drawn-out and predictable. For everyone’s sake.

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