What’s the Buzz with Bitcoin?

Cryptocurrency Is a Speculative Asset

The message is the same, regardless of who’s asking. Cryptocurrency is not a currency at all. It’s a speculative asset class that is not appropriate for everyone. Only people with a high-risk tolerance should consider cryptocurrency assets. Similar to other volatile investments explained in What Is Volatility in Stocks? How Markets Move.

Like other alternative assets, cryptocurrency can be illiquid at times, and its current values may fluctuate from the purchase price. Cryptocurrency assets can be significantly affected by a variety of forces, including economic conditions and simple supply and demand.

While cryptocurrencies are speculative, it’s important to point out the markets appear to have matured over the past few years.

Market Maturity and Recent Developments

By late 2017, for example, Bitcoin became the first cryptocurrency that had a derivative contract launched on an established exchange. And within the past several weeks, a major insurance company purchased Bitcoin, and a publicly-traded company invested in the cryptocurrency.^1,2,3

If you are interested in one of the cryptocurrencies, a good first step may be to keep an eye on them for some time so you can experience first hand the fluctuations in price.

How to Explore Cryptocurrencies Safely

If you are comfortable with the volatility and want to learn more, you may find a simple internet search may generate a lot of information. But be careful. It may be helpful to stick with content that’s created by well-known publications.

You may find these helpful:

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Keep us in mind as you explore the cryptocurrency world. We must follow our firm’s policy when providing guidance on the topic, but we’d welcome the opportunity to hear your thoughts.

Frequently Asked Questions:

What is Bitcoin in simple words?

Bitcoin is a digital asset that people buy, sell, or hold online. It is not controlled by any government or bank. Many investors treat Bitcoin like digital gold because its price can rise or fall quickly.

Is cryptocurrency safe for beginners?

Cryptocurrency can be risky for beginners. Prices change fast, and losses can happen suddenly. New investors should start small, learn the basics, and never invest money they cannot afford to lose.

Why is Bitcoin so volatile?

Bitcoin is volatile because it depends on supply and demand, market news, investor emotions, and global economic trends. Even small events can cause large price movements.

Is cryptocurrency a speculative asset?

Yes. Cryptocurrency is considered a speculative asset. This means people invest hoping prices will rise, but there are no guarantees. It is not backed by physical assets or government protection.

Should I invest in Bitcoin?

Bitcoin may suit people with high risk tolerance. If you prefer stable returns, traditional investments may be better. Always research carefully before investing.

How can I learn about crypto safely?

Follow trusted financial websites, avoid social media hype, and understand basic terms like blockchain, wallets, and exchanges before buying any crypto.

Can Bitcoin lose all its value?

Yes. Like any speculative investment, Bitcoin could drop sharply or even become worthless if demand disappears or regulations change.

 How much should beginners invest in crypto?

Most experts suggest starting with a very small amount. Think of crypto as a learning investment, not a guaranteed income source.

What makes cryptocurrency different from normal money?

Traditional money is controlled by banks and governments. Cryptocurrency runs on blockchain technology and works independently of central authorities.

Is Bitcoin good for long-term investment?

Some people hold Bitcoin long-term, hoping for growth. Others trade short-term. Both strategies carry risk, and results depend on market conditions.

^{2. The Wall Street Journal, December 10, 2020}

^{3. Bloomberg.com, December 7, 2020}