In this photographic illustration, a visual representation of the digital cryptocurrency, Bitcoin is on display in front of the Bitcoin course chart on February 9, 2021 in Paris, France.
Chesnot | Getty Images
Bitcoin’s roller coaster ride continued, sending a warning signal to curious investors who might be interested in putting money into the highly speculative cryptocurrency.
The digital asset soared to a new record, close to $ 58,000 per currency on Sunday, according to data from Coin Metrics. But on Monday, the recovery was reversed after a series of criticisms from high profile players.
First, Tesla CEO Elon Musk tweeted over the weekend that the price of bitcoin seemed high when the currency exceeded the $ 1 trillion market value. Then, on Monday, Treasury Secretary Janet Yellen said that bitcoin is an “extremely inefficient way of conducting transactions”.
This led to a drop, causing bitcoin to fall more than 10% on Monday. On Tuesday, the decline continued, with the currency dropping another 10% to around $ 48,000.
Financial experts generally advise people who want to invest in bitcoin to allocate only a small part of their portfolio. The UK Financial Conduct Authority has just issued a similar warning.
“People should invest only 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 who are close to retirement, those who will need the money in the short term, or people looking to trade frequently for a profit can reconsider bitcoin as an asset for these purposes.
“Perhaps there are more opportunities to make money because it is very volatile, but it can become very addictive very quickly to start trading back and forth,” he said. “And, most people who do this 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 impose rules on buying and selling, said David Sacco, professor of economics at the University of New Haven.
“You can get experience and not blow yourself up in the process,” he said.
Buy for a long term
Certainly, many bulls see the value of bitcoin exploding in the future as adoption continues.
For those determined to keep bitcoin in the long run, a sale after reaching a record is not a major concern. And, the asset is still up about 80% this year alone.
Those wishing to invest in bitcoin should assess their position in relation to other personal finances and investment goals to determine whether they have any extra money to place in a risky asset.
If you do, it’s okay to put some money into bitcoin and buy on a day when it’s low, said Anjali Jariwala, a certified financial planner and accountant and founder of Fit Advisors in Torrance, California.
“Throw some money at it and let it stay there and season for a while,” she said. “Just so as not to make decisions every time there is a price fluctuation, which, at this point, happens every few days.”
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Disclosure: NBCUniversal and Comcast Ventures are investors in Nuts.