Major cryptocurrencies such as bitcoin and ether had a rocky start until 2022.
For some investors, this may present itself as an opportunity to buy risky digital assets.
Bitcoin fell 6% on Monday, falling below $ 40,000 per coin for the first time since September, according to Coin Metrics. At the same time, the aether lost 7% of its value, plunging below $ 3,000.
Dips provide a chance for those interested in investing in cryptocurrencies to revisit their financial plan and buy into the volatile asset class if it makes sense to them, said Tyrone Ross, CEO of Onramp Invest, a crypto-asset platform for financial advisors and businesses. .
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“When something goes on sale and you like it, you should buy it,” he said.
$ 100,000 bitcoin predictions
Bitcoin bulls argue that the asset has room to operate this year, even though it’s got off to a rough start.
“I think [bitcoin is] will hit $ 100,000 this year, probably by… the middle of it, ”Antoni Trenchev, co-founder and managing partner of cryptocurrency lending platform Nexo, told“ Street Signs Asia ”on Monday. from CNBC.
Other experts have made similar predictions. Matt Hougan, Chief Investment Officer of Bitwise Asset Management, in an October interview with Bloomberg TV said bitcoin could hit the $ 100,000 mark in 2022.
Goldman Sachs analysts wrote in a recent note that the company could see bitcoin take market share from gold and climb to this key threshold.
Bitcoin hit an all-time high of nearly $ 69,000 in November, but has been trending down since then. Still, its value increased by around 40% over the year.
In addition to the potential price action, cryptocurrencies have become an increasingly integrated and accepted form of payment.
“I think we are not yet at mass adoption, but we are at mass acceptance,” Ross said, adding that for those who have done their research and decided crypto is right for them, this is the good time to start investing.
Volatility is built in
Of course, you shouldn’t rush into an investment just because it’s relatively cheap, according to experts.
If buying crypto doesn’t meet your long-term financial goals, you shouldn’t buy it just because it’s trading at a relative discount, according to Ivory Johnson, a certified financial planner and founder of Delancey Wealth Management. in Washington, DC
“If your time horizon is 10 years, I think now is the time to buy it,” he said. Otherwise, he recommends that investors take a more holistic approach to the asset class instead of trying to time a volatile market.
Investors should have a clear reason to buy crypto instead of being drawn in just because the price has fallen, he said. Reasons include viewing the asset as a store of value, viewing it as uncorrelated, or wanting to own it due to the increasing rate of adoption.
Before getting started, people should be aware of how much of their total portfolio is invested in cryptocurrencies and ensure that 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% in crypto and can’t stand volatility, you’ve got what’s called a problem,” he said. “But if you’ve gone down to 1% or 2% or 3%, it’s not that big of a hit for your portfolio.”
What to expect while you invest
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Investors should expect cryptocurrencies to remain volatile. In addition, the historically risky asset has not been tested in an environment like the one we see today, where interest rates are expected to rise, according to Ross and Johnson.
“You should expect that [crypto] will go down even more, so only put in what you can afford to lose, ”Ross said. “If we wake up tomorrow and it drops to zero, you should still be able to pay your rent. “
Before putting money into crypto, both experts stressed the importance of having a secure personal financial situation and a clear investment plan. “If you average the costs down and up, it will mitigate that volatility and also improve returns,” Ross said.
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Disclosure: NBCUniversal and Comcast Ventures are investors in Tassels.