Don’t Invest in Bicoin If You Don’t Understand It

Bitcoin rapid price fluctuations suggest that people should think before pouring money into the cryptocurrency. Some financial experts believe one may lose money if one does not understand crypto assets before investing.

On Friday, the price value of the high-flying crypto recorded $41,973. After reaching high, it then crashed by 15% on Monday, thus liquidating approximately $200 billion from the cryptocurrency market.

Price Fluctuations

The sudden price fluctuation in the price value is a normal thing in the crypto markets. David Yermack, finance professor at NYU Stern School of Business, explained that he only expected volatility from Bitcoin. And since first day, it is not a safe investment for people because there is a lot of risk attached with it.

In the last ten years, the top digital asset crashed unlimited times as it’s a usual thing. Crypto bulls, on the other hand, are optimistic that price would increase multifold in the future. According to Yermack, Bitcoin is a “speculative asset.” It is true that the top digital coin has gained enough reputation but still we do not call it a mainstream trading instrument for investors. He further elaborated that one must not invest money on something which he could not understand.

Speculative Asset

Portfolio experts advise investors to dedicate a small portion of their portfolio to Bitcoin. If they lose it to the asset, they won’t regret it. What’s more, people should not stake money at risk if they are going to retire. Short term traders should pause a minute before diving into the crypto industry.

At final, Yermack advised to go for crypto products that are not speculative much as Bitcoin. Investors can pick blockchain companies or some other potential companies dealing with cryptocurrency.

For people holding the leading digital asset for a long period, the temporary ups and downs do not matter a lot. Humble Ventures co-founder Harry Alford explained that there is existence of bulls who come only to take profit by liquidating digital assets. But for long-term holders, correction is not a big thing. Alford believes Bitcoin could set up an environment of financial inclusion to block people.

Recently, the Financial Conduct Authority (FCA) of United Kingdom released a warning of beware before investment in risky assets out there.

Currently, Bitcoin is trading at $37,380 with a minimum change in the price value over the day.

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