Bitcoin, the largest cryptocurrency by market cap, continues making headlines. After gradual gains throughout 2023, the dominant crypto hit new record highs in March 2024, rising above $70,000 for the first time.
But deciding to buy Bitcoins calls for looking beyond today’s headlines. Keep in mind Bitcoin is a risk investment with high volatility, and generally should be considered only if you have a high-risk tolerance. Things are not any different if you are in a strong position already you can afford to lose some or all of your investment.
If you so decide to invest in Bitcoin, it is important to maintain a diversified portfolio that includes several different types of investments. In this way, you’ll certainly reduce your overall risk exposure.
Investing in Bitcoin Pros
There’s no denying that Bitcoin historically has offered the potential for high returns. Not to mention it is decentralized. Having said that, many people decide to trade and store Bitcoin on centralized platforms.
It doesn’t end at that considering Bitcoin has the potential to be a non-correlated asset, similar to gold. What this simply means is that it may not follow the trends of other assets, such as stocks. But while Bitcoin has had moments of non-correlation, it is yet to prove itself as a truly non-correlated asset.
Investing in Bitcoin Cons
You probably already know that the price of Bitcoin can go up, but it can also go down- a lot. Unlike traditional financial exchanges, crypto exchanges don’t have circuit breakers, which automatically pause trading when prices dive too quickly. Moreover, crypto markets also trade 24/7, and dramatic dips can happen at any time.
If this is not enough, crypto exchanges lack basic consumer protections, like insurance protection from the Securities Investor Protection Corp, and the Federal Deposit Insurance Corp, found in traditional financial products.
To buy Bitcoins or any cryptocurrency, you will need a crypto exchange where buyers and sellers meet to exchange dollars for coins. Some of the most common ones include Coinbase, Gemini, and Kraken. Note that when it comes to BTC, there is also the term ‘trading pair,’ such as BTC to Tether (USDT) or USD Coing (USDC).
Remember, past performance is not an indicator of future results. Prices plunged in 2022, so for those planning to invest in crypto need to be cautious at all times to avoid regrets.
