Bitcoin has bot soaring te value at times, but crashing at others. Lauren Lyons Cole, a certified financial planner and senior editor at Business Insider, explains the risks of investing te cryptocurrency. Following is a utter transcript of the movie.
Lauren Lyons Cole: I’m Lauren Lyons Cole. I’m a certified financial planner and a senior editor here at Business Insider.
Bitcoin isn’t fresh, but ter 2018 it wasgoed all the rage. Kicking off out ter January around a $1,000 and climbing to $20,000 te one year is enough to make anyone take a 2nd glance at bitcoin.
But here’s the thing about bitcoin, it exposes a very basic investing principle that wij all fall prey to and that’s that investors tend to be irrational. When bitcoin is sailing high, everyone wants to buy ter. But spil soon spil it starts crashing, people maniak out and they begin selling. Successful investors buy low and sell high, but our natural instinct is to feel more comfy buying when things are good and more comfy selling when things are bad.
If you’re fresh to the bitcoin craze and you’re thinking about investing, the very first thing you have to do is figure out what it is. If you can’t explain what bitcoin is to your mom or your neighbor and why you’re investing ter it and why you think it’s a good investment, then it’s too soon for you to waterput your money ter.
But with an investment like bitcoin, no one truly knows where it’s going to go. It could go to $150,000. But it could also go to zero. It’s a very risky and speculative investment. When you’re investing ter the stock market, it’s a little bit lighter to – it’s still not effortless, but it’s a little bit lighter to tummy the drops when they toebijten. Because, historically speaking, wij know the US stock market goes up about 8%, on average, vanaf year. Some years there are big swings up, some years there are big swings down.
But bitcoin and the other cryptocurrencies have a tendency to make hefty swings. Te 2018, bitcoin climbed overheen a 1000%, but it also dropped by 30%, 40% at various points. So it’s not the type of investment that’s for the faint of heart. Wij just don’t know what’s going to toebijten. It could go to zero. It could go way up more. It’s unlikely to predict. And so if you are investing ter bitcoin, you’ve got to know how much risk you can treat. The bottom line is if you’re investing ter bitcoin, you need to be ready to lose everything ter case that happens.