Bitcoin Slumps, Why You Should be Cautious before Investing in Cryptocurrency

Bitcoin continues to hover around $57,000 this week, following a 24-hour high of $58,519 Thursday, according to Coindesk’s Bitcoin tracker. This is the highest Bitcoin’s price has been since May, when it had a stretch of of days between $55,000 and $60,000.

The latest increase follows weeks of hovering just over $40,000 since its last push over $50,000 in early September. It also brings Bitcoin closer to its all-time high above $60,000 in April, a high that was followed by a decisive drop to under $30,000 as recently as July 20.

So what should crypto investors make of this latest increase? Nothing, according to the experts we’ve talked to.

But given the crypto’s history of volatility, this increase doesn’t guarantee a long-term reversal. Bitcoin’s price is just as likely to fall back down as it is to continue climbing. The price swings are going to keep happening, and experts say they’re something long-term crypto investors will have to continue dealing with.

What Investors Should Know

If you’re investing in cryptocurrency, expect volatility to continue. That’s why experts recommend keeping your crypto investments to less than 5% of your total portfolio.

“I know these things are super volatile, like some days they can go down 80%,” Humphrey Yang, the personal finance expert behind Humphrey Talks, previously told NextAdvisor. “But if you believe in the long-term potential of [Bitcoin], just don’t check on it. That’s the best thing you can do.”

Just like you shouldn’t let a price drop influence your decision to buy crypto, don’t let a sudden price increase alter your long-term investment strategy. Even more importantly, don’t start buying more crypto just because the price is rising. Always make sure your financial bases are covered — from your retirement accounts to emergency savings — before putting any extra cash into a speculative asset like Bitcoin.

Bitcoin’s latest big jump also isn’t anything new. “While in the long-term Bitcoin’s price has generally gone up, we experience a lot of volatility along the way,” says Kiana Danial, founder of Invest Diva.

Investors should continue to hold and not worry about the fluctuations, like Danial, who says she’s not “jumping on the hype.”

No matter if crypto is going up or down, the best thing you can do is to not look at it. Set it and forget it like you would any traditional long-term investment account. “If you let your emotions get too much into it then you could sell at the wrong time, or you might make the wrong decision,” says Yang. “You stress out about it, and I don’t think that’s a healthy way to approach it.”

 

October 15, 2021