Bitcoin’s slide wiped out $ 90 billion in market value. What to consider
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Bitcoin, however, has been on a downward spiral since April, when it hit an all-time high of nearly $ 65,000. Since then, the cryptocurrency has fallen by more than 50% and has almost wiped out all of its gains since the start of the year.
Extreme and sometimes unpredictable up-down movements are relatively common for cryptocurrency and are likely to continue.
“The only thing I can expect for sure is volatility,” said David Yermack, professor of finance at the Stern School of Business at New York University. “From day one it has been a risky investment for people.”
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Bitcoin has seen both astronomical growth over the past decade and massive sales at various points in between. Although many bulls indicate that its past performance is a sign that the cryptocurrency will continue to rise in the future, that may not happen, according to Yermack.
“It is a purely speculative asset,” he said.
Only invest what you are willing to lose
Financial experts generally advise people looking to invest in bitcoin to allocate a small portion of their portfolio due to its volatile nature.
“People should really only invest what they’re willing to lose,” said Daniel Polotsky, CEO of CoinFlip, one of the largest bitcoin ATM companies in the United States.
He added that people nearing retirement, those who will need cash in the short term, or those looking to trade frequently for profit might want to reconsider bitcoin as an asset for such purposes.
“Maybe there are more opportunities to make money because it’s very volatile, but it can get very addicting very quickly to start trading both ways,” he said. declared. “And, most of the people who do that lose money.”
If you’re going to allocate part of your portfolio to a speculative asset like bitcoin, take a disciplined approach and impose buy and sell rules, said David Sacco, professor of economics at New Haven University.
“You can gain experience and not blow yourself up in the process,” he said.
Buy for the long term
Certainly, many bulls see bitcoin’s value exploding in the future as adoption continues.
For those who are determined to hold bitcoin for the long haul, a sale after hitting an all-time high is not a major concern and even provides an opportunity to buy more cryptocurrency at a discount.
Those who wish to invest in bitcoin should assess their position against other personal finance and investment goals to determine if they have additional money to invest in a risky asset.
If you do, then it’s okay to put money in bitcoin and buy on a day when it’s down, said Anjali Jariwala, certified financial planner, CPA and founder of Fit Advisors in Torrance, Calif. .
“Put some money in it and let it sit there and season for a while,” she said. “Just so you don’t have to make decisions every time there is a price fluctuation, which happens at this point every few days.”
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