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Major cryptocurrencies continue their rocky start to the year, falling alongside stocks.
Bitcoin fell more than 6% on Monday, falling below $33,000, according to Coin Metrics. The digital coin is now over 50% off its all-time high of nearly $69,000 in November and has lost over 30% since the start of the year.
At the same time, Ether fell more than 7% to around $2,300. It is now down more than 35% since the start of the year.
While the losses can be painful for investors, they also provide a chance for those interested in buying cryptocurrencies to review their financial plan and enter the volatile asset class if it makes sense for them. said Tyrone Ross, CEO of Onramp Invest, a crypto-asset platform for financial advisors and businesses.
“When something is on sale and you like it, you should buy it,” he said. Additionally, cryptocurrencies have become an increasingly accepted form of payment.
“I think we are not at mass adoption yet, but we are at mass acceptance,” Ross said, adding that for those who have done their research and decided that crypto is right for them, this is the good time to jump into the investment.
How to determine if crypto is right for you
To be sure, you shouldn’t rush into an investment just because it’s relatively cheap, experts say.
If buying crypto doesn’t align with your long-term financial goals, you shouldn’t buy it just because it’s trading at a relative discount, according to Ivory Johnson, certified financial planner and founder of Delancey Wealth Management at Washington, DC.
“If your time horizon is 10 years, I think now is a good time to buy it,” he said. Otherwise, he recommends investors take a more holistic approach to the asset instead of trying to time a volatile market.
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Investors should have a clear purpose for buying crypto instead of being lured in just because the price has fallen, he said. Reasons include viewing the asset as a store of value, viewing it as uncorrelated to equities, or wanting to own it due to the growing adoption rate.
Before buying, people should be aware of how much of their total portfolio is invested in cryptocurrencies and make sure the allocation matches their risk profile, Johnson said. New investors should have a clear idea of how much they are willing to risk before buying.
“If you put 20% into crypto and you can’t handle the volatility, you have what’s called a problem,” he said. “But if you have 1% or 2% or 3%, it’s not a big hit to your wallet.”
What to expect when investing
Investors should expect cryptocurrencies to continue to be volatile. Moreover, the historically risky asset has not been tested in an environment like the one we are experiencing today, where interest rates are expected to rise, according to Ross and Johnson.
“You should expect that [crypto] is going to drop further, so only invest what you can afford to lose,” Ross said. “If we get up tomorrow and it drops to zero, you should still be able to pay your rent.”
Before putting money into crypto, the two experts stressed the importance of having a secure personal financial situation and a clear investment plan. “If you average the dollar cost down and up, it will dampen that volatility and also improve returns,” Ross said.
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Disclosure: NBCUniversal and Comcast Ventures are investors in Tassels.