In this photo illustration, a visual representation of the digital cryptocurrency, Bitcoin is exposed in front of the Bitcoin exchange rate chart on February 9, 2021 in Paris, France.
Chesnot | Getty Images
The Bitcoin roller coaster ride continued, displaying a warning sign for curious investors who might be interested in putting money into highly speculative cryptocurrency.
Digital assets rose to an all-time high of nearly $ 58,000 a coin on Sunday, according to Coin Metrics. On Monday, however, the rally reversed after a series of criticisms from the profile players.
First, Tesla CEO Elon Musk wrote on Twitter over the weekend that the price of bitcoin seemed as high as the currency surpassed the market value of $ 1 trillion. Then on Monday, Treasury Secretary Janet Yellen said bitcoin was an “extremely inefficient way to transact.”
This has led to a decline, sending bitcoin more than 10% a month. On Tuesday, the fall continued, with the currency slipping another 10% to about $ 48,000.
Financial experts generally recommend that people who want to invest in bitcoin allocate only a small amount of their portfolio. The UK Financial Conduct Authority has just issued a similar warning.
“People should really only invest what they are willing to lose,” said Daniel Polotsky, CEO of CoinFlip, one of the largest bitcoin ATM companies in the United States.
He added that people close to retirement, those who will need money in the short term or people who want to trade frequently to make a profit, may want to reconsider bitcoin as an asset for these purposes.
“There may be more opportunities to make money because it’s so volatile, but it can become very addictive very quickly to start trading back and forth,” he said. “And, most people who do that lose money.”
People should really invest what they are willing to lose.
Daniel Polotsky
CEO, CoinFlip
If you plan to allocate a portion of your portfolio to a speculative asset such as bitcoin, take a disciplined approach and impose buying and selling rules, said David Sacco, a professor of economics at the University of New Haven.
“You can gain experience and not blow yourself up in the process,” he said.
Buy long term
Certainly, there are many bulls who see bitcoin exploding in value in the future as adoption continues.
For those who are determined to own bitcoin in the long run, a sale after reaching a record level is not a huge concern. And the asset is growing by about 80% this year alone.
Those who want to invest in bitcoin should evaluate where it stands compared to other personal finance and investment goals to determine if they have any extra money to put into a risky asset.
If you do, then it’s good to put some money in bitcoin and buy on a day when it doesn’t work, said Anjali Jariwala, a certified financial planner and CPA and founder of Fit Advisors in Torrance, California.
“Throw some money in it and kind of let it stay there and spice it up for a while,” she said. “Just to not make decisions every time there is a price fluctuation, which happens at this time every few days.”
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