The fall of Bitcoin shows why people should be careful before investing

In this photo, a visual representation of the digital cryptocurrency, Bitcoin is shown in front of the graph of the Bitcoin course on February 09, 2021 in Paris, France.

Chesnot | Getty Images

Bitcoin’s roller-coaster ride has continued, lighting a warning sign for curious investors who may be interested in investing in the highly speculative cryptocurrency.

The digital asset went up to a new full-time level, nearly $ 58,000 per coin on Sunday, according to data from Coin Metrics. But on Monday, the rally turned around after criticism from high-profile players.

First, Tesla CEO Elon Musk tweeted over the weekend that the price of bitcoin seemed to be high just as the currency was surpassing the $ 1 trillion market value. Then, on Monday, Finance Secretary Janet Yellen said bitcoin is a “highly inefficient way of doing business.”

That sparked a recession, sending bitcoin down more than 10% on Monday. On Tuesday, the fall continued, with the currency slipping another 10% to around $ 48,000.

Financial experts usually advise that people looking to invest in bitcoin distribute only a small portion of their portfolio. The UK Financial Conduct Authority has just issued a similar warning.

“People should only invest money that they are willing to lose,” said Daniel Polotsky, CEO of CoinFlip, one of the largest bitcoin ATMs in the US.

He said that people who are close to retirement, those who need the near-term money or people who look 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 be very addicting very quickly to start trading back and forth,” he said. “And, most people who do that lose money.”

People should only invest in what they are willing to lose.

Daniel Polotsky

Head, CoinFlip

If you’re going to assign part of your portfolio to speculative funds like bitcoin, take a control approach and apply rules to buying and selling, said David Sacco, a professor of economics at New Haven University.

“You can gain experience and not explode yourself in the process,” he said.

Buy for the long term

To be sure, there are many bulls that are seeing bitcoin explode in value in the future as adoption continues.

For those who are sure to keep bitcoin for the long term, selling after hitting a high level is not a big concern. And, the asset is still up about 80% this year alone.

Those who want to invest in bitcoin should assess where they stand with personal finances and investment goals to see if they have a little extra money to invest in risky assets.

If you do, then it’s okay to put some money into bitcoin, and buy on a day when it’s down, said Anjali Jariwala, a certified financial designer and CPA and founder of Fit Advisors in Torrance, California.

“Throw some money into it and kind of let it stay in there and season for a while,” she said. “Just so you don’t make decisions every time the price changing, which at this stage happens every few days. “

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Disclosure: NBCUniversal and Comcast Ventures are investors Dearcan.

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