In this photo illustration, a visual representation of the digital cryptocurrency, Bitcoin can be seen in front of the Bitcoin price chart on February 9, 2021 in Paris, France.
Chesnot | Getty Images
The Bitcoin rollercoaster ride has continued, with a warning sign for nosy investors who may be interested in putting money into the highly speculative cryptocurrency.
According to data from Coin Metrics, the digital asset soared to a new all-time high, near $ 58,000 per coin on Sunday. But on Monday, the rally turned around after a lot of criticism from high-profile players.
First, Tesla CEO Elon Musk tweeted over the weekend that bitcoin’s price seemed high, just as the currency surpassed a $ 1 trillion market value. Subsequently, Treasury Secretary Janet Yellen said on Monday that bitcoin is an “extremely inefficient way of executing transactions.”
That caused a slump, causing bitcoin to drop by more than 10% on Monday. On Tuesday, the decline continued, with the currency declining an additional 10% to around $ 48,000.
Financial experts generally recommend that people who want to invest in bitcoin allocate only a small portion of their wallet. The UK Financial Conduct Authority has just issued a similar warning.
“People should only really invest what they are willing to lose,” said Daniel Polotsky, CEO of CoinFlip, one of the largest bitcoin ATM companies in the US.
He added that people who are about to retire, those who need the money in the short term, or people who often want to trade to make a profit may want to rethink bitcoin as an asset to those goals.
“Maybe there are more ways to make money because it’s so volatile, but it can become very addictive to trade back and forth very quickly,” he said. “And most people who do that lose money.”
People should only really invest what they are willing to lose.
Daniel Polotsky
CEO, CoinFlip
If you’re going to allocate part of your portfolio to a speculative asset like bitcoin, take a disciplined approach and enforce buying and selling rules, said David Sacco, an economics professor at the University of New Haven.
“You can gain experience and not blow yourself up,” he said.
Buy for the long haul
Sure, there are a lot of bulls that see bitcoin explode in value in the future as adoption continues.
For those determined to hold on to bitcoin for the long term, a sell-off after hitting an all-time high is not a major concern. And its asset is still up about 80% this year alone.
Those looking to invest in bitcoin should assess where they stand with other personal finance and investment goals to determine if they have some extra cash to put into a risky asset.
If you do, it’s okay to put some money in bitcoin and buy it on a day when it runs out, said Anjali Jariwala, a certified financial planner and CPA and founder of Fit Advisors in Torrance, California.
“Throw in some money and let it stay there in season for a while,” she said. ‘So that you don’t make decisions every time there is a price fluctuation, which at the moment happens every few days.’
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