Bitcoin price crashes again. What should investors pay attention to? Bitcoin’s trademark volatility is up its head again, showing investors the risk they can face when they deposit money in the cryptocurrency. For details Cryptocoin. com
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Bitcoin price and volatility
The coin fell as much as 10% on Monday amid a global market downturn. Bitcoin was last down around 8% and hovered around $43,800 per token. The rest of the cryptocurrency market was also in a slump, with Ether falling more than 9% to around $3,046 per coin. Extreme up and down volatility is relatively common for cryptocurrencies and investors can expect them to continue in the future. “The only thing I can expect for sure is volatility,” said David Yermack, professor of finance at New York University’s Stern School of Business. “From day one, it has been a risky investment for people.”
Bitcoin has seen both astronomical growth and massive sales over the past decade, at the various points in between. While many bulls point to its past performance as 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,” Yermack said, adding that while Bitcoin is growing in popularity, it is still not considered a mainstream investment, meaning many have little knowledge of the asset. “You should never invest in anything you don’t understand,” said Yermack.
Invest only as much as you want to lose
Still, investing in cryptocurrencies has become increasingly popular, especially with how easy it is to buy them. Even some financial advisors are starting to view cryptocurrencies as personal wealth creation tools. However, because cryptocurrencies are risky assets, financial experts generally recommend that people who want to invest in Bitcoin allocate a small amount of their portfolio and have no problem losing the asset entirely.
“People should invest as much as they really want to lose,” said Daniel Polotsky, CEO of CoinFlip, one of the largest Bitcoin ATM companies in the US. He added that people close to retirement, those who will need money to invest in the short term, or those who want to trade frequently to make a profit, may want to rethink Bitcoin as an asset for these goals. Polotsky says:
Maybe because it is so volatile there are more opportunities to make money, but getting started with back and forth trading can get addictive very quickly. And most of those who do lose money.
If you’re going to assign some of your portfolio to a speculative asset like Bitcoin, take a disciplined approach and set rules for trading, said David Sacco, professor at the University of New Haven. “You can gain experience and not sell yourself to padollars in the process,” he said. One way to protect yourself from selling at a loss is to commit to holding the asset long-term, similar to other stocks and bonds in your investment portfolio. Anjali Jariwala, certified financial planner and CPA and founder of Fit Advisors in Torrance, California, says, “Throw in some money and let it stay there and linger for a while. That way, every time the price fluctuates, you’re not making decisions that happen every few days at this point. ”